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War  Tax 


A  complete  analysis 

of  the  War  Revenue  Law 

enacted  by  the 

Congress 


1917 


The  Oakland  Bank  of  Savings 

Oakland,  California 


War  Tax 


A  complete  analysis  and 
Explanation  of  Normal  Taxes  and 

Special   War  Taxes 

now  imposed  by  the  Federal  Government, 
including  tables  and  examples, 

applied  to 

corporations,  partnerships, 
individuals,  etc. 


Compiled,  charted  and  edited  by 

Ewell  D.  Moore 

Attorney-at-La^jo — Author  of  "Federal  Taxation" 
(Member  San  Francisco  Bar} 


The  information  contained  in  this  book  is  the 
result  of  long  study,  followed  by  painstaking 
investigation  made  by  the  author  in  the  City 
of  Washington  while  the  War  Tax  law  was  in 
process  of  enactment.  All  his  statements, 
tables  and  examples  were  gone  over  and 
verified  by  the  best  tax  experts  in  Washington 
before  they  were  released  for  publication. 


Published  by 

The  ten  Bosch  Company 

San  Francisco,  California 

Copyright,  1917,  by  EWELL  D.  MOORE 


Table  of  Contents 


Abatement  Claim 20 

Admissions,  Tax 27 

Admission  Tax,  Returns 27 

Aliens,  Credits  Allowed 6 

Aliens,  Deductions  Allowed 6 

Assessment  and  Notice 7 

Assessment  Notice  and  Payment 11 

Automobiles,  Trucks,  etc 25 

Beer,  Ale,  Porter,  etc 21 

Beverages  Tax 21 

Billiards  and  Bowling  Alleys 30 

Bonds  of  Indebtedness,  etc • 27 

Brokers,  12,  29 

Cabarets,  etc 27 

Cameras  Tax 26 

Capital  Denned 20 

Capital,  Nominal 20 

Capital  Stock  Tax.  .  .  .  , 28,  29 

Chewing  Gum 26 

Cigarettes 23,  24 

Cigars,  Tobacco 23 

Circuses , 30 

Conditional  and  Other  Exemptions 9 

Conveyances 28 

Corporation  Returns 11 

Corporations,  Dividend  Statement 11 

Corporations,  Income  Tax 8 

Corporations,  Penalties 11 

Credits  Allowed,  Aliens 6 

Credits  Allowed,  Individuals 6 

Credits  fo.  War  Profits 12 

Custom  House  Entries 28 

Deductions  Allowed,  Individuals 5 

Deductions,  Domestic  Corporations 9 

Deductions,  Foreign  Corporations 9 

Definitions  of  Tax  Terms  Used 31 

Distilled  Spirits 21,  22 

Dividend  Statement,  Corporations 11 

Dividends  Defined 12 

Estate  Tax,  Payment 14 

Estate  Tax,  Penalties 14 

Estate  Tax,  Procedure 13 

Estate  Tax,  Rates 13 

Example,  Normal  and  Surtax 4 

Example,  Normal  Tax 4 

Example  No.  1  War  Profits 15 

Example  No.  2  War  Profits 18 

Example  No.  3  War  Profits 18 

Example  No.  4  War  Profits 18 

Example  No.  5  War  Profits 19 

Excise  Taxes 25 

Exemptions,  Conditional  and  Other 5 

Exemptions,  Personal 4 

Exemptions,  War  Excess  Profits 19 

Express  and  Freight 24 

Facilities  by  Public  Utilities  Tax 24 

Filing  Returns,  Date 11 

Freight  and  Express 24 

Grape  Brandy 22 

Grape  Juice,  Gixgct  Ale,  CT 23 

Graphophones.  etc 26 

Gross  EstaU:,  O<-hv,u! 13 

Guardians,  Trustees —  Return* 6 

How  to  Compute  War  Profits 15 

Income  Defined 3 


Income  Tax,  Corporations 8 

Income  Tax,  Individuals 3 

Income  Tax,  Rates 3 

Information  at  Source 7,  12 

Insurance,  Casualty 25 

Insurance,  Life 25 

Insurance,  Marine,  Fire,  etc 25 

Invested  Capital  Defined 19 

Jewehry 26 

License  to  Collect 8 

Motor,  Sailing  Boats,  Yachts 25 

Moving  Picture  Films 26 

Net  Estate,  Defined 13 

Normal  Tax  Defined 3 

Not  in  Business,  Prewar  Period 19 

Other  Exemptions 5 

Parcel  Post  Packages 29 

Partnership  Returns 6,  21 

Payment,  Estate  Tax 14 

Payments  in  Advance 7 

Penalties,  Corporations 11 

Penalties,  Estate  Tax 14 

Penalties,  General 11 

Penalties,  Spirits  Tax 22 

Penalties,  Stamp  Tax 29 

Penalty  for  Delay 7 

Perfumes 21 

Picture  Shows,  Amusements,  etc 27 

Playing  Cards 28 

Power  of  Attorney 28 

Postal  Rates 30 

Prewar  Period  Defined 14 

Produce  Sold  on  Exchange 29 

Promissory  Notes 28 

Proprietary  Medicines  Tax 26 

Proxies 28 

Rectifying  Spirits  Tax 22 

Returns  by  Receivers,  Trustees 11 

Returns  Required 7 

Seat.Tax,  Theatres 30 

Soft  Drinks  Tax 23 

Soft  Drinks  Tax,  Returns 23 

Sparkling  Wines 22 

Special  Taxes 29 

Sporting  Goods  Tax 26 

Stamp  Tax 27 

Still  Wines,  Vermuth,  etc 21 

Stock  Certificates 28 

Stock  Transfers 28 

Subnormal  Profits 20 

Surtax  Defined 3 

Syrups  and  Extracts 23 

Telegraph,  Telephone  Messages 25 

Theatres,  Operas,  etc 27 

Tickets,  Berths,  Seats,  etc 24,  28 

Tobacco  and  Snuff 24 

To  Prevent  Evasion 12 

Toilet  Articles  Tax 26 

Undistributed  Income  Tax 8 

War  Estate  Tax 13 

War  Excess  Profits,  Rates 15 

War  Excess  Profits,  Deductions 15 

War  Excess  Profits  Tax 14 

Withholding  Tax  on  Aliens 11 

Withholding  Tax  at  Source 7 


War  Tax 

Foreword 


Ort  OctoberS,  1917,  Congress  enacted  the  most  far-reaching  War  Tax  law  ever  known  to  the 
American  people.  It  became  immediately  effective.  The  details  of  the  numerous  War  Taxes 
are  of  interest  to  every  person  earning  over  $1,000  a  year,  and  to  every  corporation,  partnership 
or  other  concern,  and  every  individual  engaged  in  business. 

This  book  tells  the  taxpayer  what  the  War  Taxes  are,  when,  where  and  how  they  must  be 
paid,  and  helps  him  to  solve  his  own  tax  problems  arising  from  this  legislation  and  to  make  the 
returns  required  by  the  law.  Severe  penalties  fall  upon  those  who,  through  ignorance  or  other- 
wise, fail  to  make  returns  in  the  manner  and  at  the  time  prescribed  by  law,  and  who  do  not  pay 
promptly  the  taxes  found  to  be  due. 

It  is  important  to  note  that  the  rates  given  here  are  the  combined  taxes  of  the  old  and  the 
new  laws.  No  reference  need  be  made  to  the  old  revenue  law  in  figuring  the  taxes  now  in 
effect. 


War  Income  Tax 

(Effective  from  Jan.  1,  1917) 
ON  INDIVIDUALS 

Every  person,  a  citizen  or  resident  of  the  United  States,  who  received  more  than  $1000  net 
income  in  the  preceding  calendar  year,  if  unmarried,  and  more  than  $2000  if  married,  must  pay 
income  tax.  This  tax  applies  to  every  citizen  or  resident  of  the  United  States  as  to  his  or  her  net 
income  from  all  sources  within  and  without  the  United  States,  and  to  every  non-resident  alien 
as  to  his  or  her  net  income  from  sources  within  the  United  States,  including  the  interest  on  bonds, 
notes  and  other  interest-bearing  obligations,  not  specifically  exempted. 

INCOME  DEFINED 

Income  includes  gains,  profits  and  income  from  salaries,  wages  or  compensation  for  personal 
services  of  every  character,  or  from  professions,  vocations,  businesses,  trade,  commerce  or  sales, 
or  dealings  in  property,  real  or  personal,  growing  out  of  the  ownership  or  use  of  or  interest  in  real 
or  personal  property;  also  from  interest,  rent,  dividends,  securities,  or  the  transaction  of  any 
business  carried  on  for  gain  or  profit,  and  income  derived  from  any  source  whatever.  Net  in- 
come is  that  which  remains  after  the  deductions  herein  enumerated  are  made. 

NORMAL  AND  ADDITIONAL  TAXES  DEFINED 

The  Income  Tax  on  individuals  is  divided  into  two  parts,  the  Normal  tax  and  the  Additional 
or  Surtax.  Both  are  computed  on  the  net  income  for  the  preceding  calendar  year  ending  De- 
cember 31.  The  Normal  tax  is  a  fixed  rate  on  the  net  income  above  the  personal  exemptions 
stated  above.  The  Additional  or  Surtax  is  a  graduated  tax  on  net  incomes  above  $5000. 

THE  RATES 

The  Normal  tax  on  an  unmarried  person's  net  income  is  2  per  cent  on  the  amount  of  income 
over  $1000  and  not  over  $3000,  and  4  per  cent  on  the  amount  of  income  over  $3000.  The  Normal 
tax  on  a  married  person's  net  income  is  2  per  cent  on  the  amount  of  income  over  $2000  and  not 
over  $4000,  and  4  per  cent  on  the  amount  of  income  over  $4000. 

366319 


4  W AR      TAX 

EXAMPLE  OF  NORMAL  TAX 
(Unmarried  person) 

Net  income  for  taxable  year $5,000  .00 

Amount  exempted 1,000  .00 

Amount  taxable $4,000 .00 

as  follows: 

2%  on  amount  by  which  $3,000  exceeds  $1,000  (that  is,  2%  on  $2,000). ...  $40 .00 

4%  on  amount  by  which  $5,000  exceeds  $3,000  (4%  on  $2,000) 80  . 00 

Total  tax $120.00 

EXAMPLE   OF    NORMAL   TAX 

(Married  person) 

Net  income  for  taxable  year $5,000  .00 

Amount  exempted 2,000.00 

Amount  taxable $3,000.00 

as  follows: 

2%  on  amount  by  which  $4,000  exceeds  $2,000,  (that  is,  2%  on  $2,000) $40  .00 

4%  on  amount  by  which  $5,000  exceeds  $4,000,  (4%  on  $1,000) 40  .00 

Total  tax $80.00 

ADDITIONAL  OR  SURTAX 

The  law  of  1916  imposed  a  surtax  on  annual  net  incomes  over  $20,000.  The  War  Tax  not 
only  increased  the  old  rates  on  sums  above  $20,000,  but  fixed  a  new  surtax  on  all  incomes  in 
excess  of  $5000.  On  pages  16  and  17  will  be  found  an  Income  Tax  table  combining  the  old  and 
new  rates  on  sums  from  $2000  to  $2,000,000  inclusive.  Also  on  page  19  will  be  found  a  condensed 
table  giving  the  total  percentages  of  the  old  and  new  taxes. 

EXAMPLE  OF   COMBINED   NORMAL   AND   SURTAXES 

(For  a  married  person) 

Net  income  for  taxable  year $100,000 

NORMAL  TAX 

2%  on  amount  by  which  $4,000  exceeds  $2,000,  (2%  on  $2,000) $     40  .00 

4%  on  amount  by  which  $100,000  exceeds  $4,000  (4%  on  $96,000) ....       3,840  .00 

Total  normal  tax $3,880.00 

SURTAX 

1%  on  amount  by  which  $7,500  exceeds    $5,000    (1%  on  $2,500) ...  25  .00 

2%  on  amount  by  which  $10,000  exceeds    $7,500    (2%  on  $2,500)... .  50.00 

3%  on  amount  by  which  $12,500  exceeds  $10,000    (3%  on  $2,500)... .  75.00 

4%  on  amount  by  which  $15,000  exceeds  $12,500    (4%  on  $2,500).. .  .  100  .00 

5%  on  amount  by  which  $20,000  exceeds  $15,000    (5%  on  $5,000) .  .  .  250  .00 

8%  on  amount  by  which  $40,000  exceeds  $20,000    (8%  on  $20,000) .  .  1,600  .00 

12%  on  amount  by  which  $60,000  exceeds  $40,000  (12%  on  $20,000).  .  2,400.00 

17%  on  amount  by  which  $80,000  exceeds  $60,000  (17%  on  $20,000) .  .  3,400  .00 

4,400.00 


Total  tax $16,180.00 

PERSONAL  EXEMPTIONS 

For  the  purpose  of  the  Normal  tax  only,  the  following  exemptions  are  allowed: 

$1,000  for  a  single  person  not  the  head  of  a  family. 

$2,000  for  a  married  person  living  with  spouse,  or  the  head  of  a  family. 

Only  one  deduction  shall  be  made  for  a  husband  and  wife  living  together. 


IV  A  R      TAX 


A  further  exemption  of  $200  for  each  dependent  child  under  18  years  of  age.  This  exemption 
may  also  be  made  by  a  trustee  or  guardian,  as  to  income  from  property  in  his  charge  in  favor  of 
each  such  ward. 

There  is  also  allowed  an  exemption  from  the  amount  of  the  net  income  of  estates  of  deceased 
citizens  or  residents  of  the  United  States  during  the  period  of  administration  or  settlement,  and 
of  trust  or  other  estates  of  citizens  or  residents  the  income  of  which  is  not  distributed  annually  or 
regularly,  the  sum  of  $3000,  including  the  deductions  allowed  under  the  head  "Deductions 
Allowed." 

A  non-resident  alien  is  not  required  to  pay  the  2%  additional  Normal  tax  imposed  by  the 
War  Revenue  law.  To  compensate  for  this  exemption  such  non-resident  alien  is  allowed  no 
personal  exemption  for  the  purpose  of  the  Normal  tax  of  2%  imposed  by  the  law  of  1916. 

OTHER  EXEMPTIONS 

Income  from  the  following  sources  is  exempt  from  taxation: 

1.  Proceeds  of  life  insurance  policies  paid  to  individual  beneficiaries  upon  death  of  insured. 

2.  Amount  received  by  the  insured  as  return  premiums  on  life  insurance  endowment,  or 
annuity  contracts,  either  during  the  term,  or  upon  surrender  of  the  contract. 

3.  Value  of  property  acquired  by  gift,  bequest  or  devise  or  descent  (but  income  from  such 
property  shall  be  included  as  income.) 

4.  Interest  on  obligations  of  a  State  or  any  political  subdivision  thereof,  or  on  obligations 
of  United  States  (which  contain  no  provision  specifically  subjecting  them  to  taxation),  or  its 
possessions,  or  securities  under  Federal  Farm  Loan  Act. 

5.  Compensation  of  present  President  of  United  States  during  term  for  which  he  has  been 
elected,  and  judges  of  Supreme  Court  and  inferior  courts  of  United  States  now  in  office,  and 
compensation  of  all  officers  and  employees  of  a  State  or  any  political  subdivision  thereof,  except 
when  such  compensation  is  paid  by  United  States  Government. 

DEDUCTIONS  ALLOWED 

On  the  net  income  of  a  citizen  or  resident  following  deductions  are  allowed: 

1.  Necessary  expenses  actually  paid  in  carrying  on  any  business  or  trade,  not  including 
personal,  living  or  family  expenses. 

2.  All  interest  paid  within  the  year  on  indebtedness,  except  indebtedness  incurred  for  pur- 
chase of  obligations  or  securities,  the  interest  on  which  is  exempt  from  taxation  as  income. 

3.  Taxes  paid,  including  those  imposed  by  United  States  (except  Income  and  excess  Profits 
taxes)  or  of  its  territories  or  possessions,  or  of  any  foreign  country,  or  of  any  State,  county,  school 
district  or  municipality,  not  including  those  assessed  against  local  benefits. 

4.  Losses  actually  sustained  in  business  or  trade,  or  from  fires,  storms,  shipwreck  or  any 
other  casualty,  and  from  theft,  when  such  losses  are  not  compensated  for  by  insurance  or  other- 
wise. 

To  ascertain  losses  sustained  from  sale  or  other  disposition  of  property  acquired 
before  March  1,  1913,  the  fair  market  price  or  value  as  of  March  1,  1913,  shall  be  basis 
for  determining  same. 

5.  In  transactions  entered  into  for  profit  but  not  connected  with  the  business  or  trade,  the 
losses  actually  sustained  therein  to  an  amount  not  exceeding  profits  arising  therefrom. 

6.  Debts  due  actually  ascertained  to  be  worthless  and  charged  off  within  the  year. 

7.  Reasonable  allowance  for  exhaustion,  wear  and  tear  of  property  from  its  use  or  employ- 
ment in  business  or  trade. 

(a)  In  case  of  oil  or  gas  wells  a  reasonable  allowance  for  actual  reduction  in  flow  and  pro- 
duction, to  be  ascertained  not  by  the  flush  flow  but  by  the  settled  production  or  regular  flow. 

(b)  In  case  of  mines  a  reasonable  allowance  for  depletion  not  to  exceed  market  value  in  the 
mine  of  the  product  thereof,  which  has  been  mined  and  sold  during  the  year,  such  reasonable 
allowance  to  be  made  in  cases  of  both  (a)  and  (b)  under  regulations  prescribed  by  Secretary  of 
Treasury.     When  the  allowances  authorized  in  (a)  and  (b)  shall  equal  capital  originally  invested, 
or  in  case  of  purchase  made  prior  to  March  1,  1913,  the  fair  market  value  as  of  that  date,  no 
further  allowance  shall  be  made. 

No  deduction  shall  be  allowed  for  money  paid  out  for  new  buildings,  permanent 
improvements  or  betterments,  made  to  increase  the  value  of  the  property  and  no  de- 
duction shall  be  made  for  any  amount  of  expense  of  restoring  property  or  making  good 
the  exhaustion  thereof  for  which  an  allowance  is  or  has  been  made. 


W  A  R      T  A  X 


8.  Contributions  or  gifts  actually  made  within  the  year  to  corporations  or  associations 
organized  and  operated  exclusively  for  religious,  charitable,  scientific,  or  educational  purposes, 
or  to  societies  for  the  prevention  of  cruelty  to  children  or  animals,  no  part  of  the  net  income  of 
which  inures  to  the  benefit  of  any  private  stockholder  or  individual,  to  an  amount  not  in  excess 
of  15%  of  the  taxpayer's  taxable  net  income  as  computed  without  the  benefit  of  this  deduction. 
Such  contributions  or  gifts  shall  be  allowable  as  deductions  only  if  verified  under  rules  and  regu- 
lations prescribed  by  the  commissioner  of  Internal  Revenue. 

CREDITS  ALLOWED 

In  figuring  Normal  tax  only,  income  embraced  in  a  personal  return  may  be  credited  with 
dividends  received  on  stock  or  from  the  net  earnings  of  any  corporation,  joint-stock  company 
or  association,  trustee  or  insurance  company,  which  is  taxable  upon  its  net  income.  This  means 
that  no  Normal  tax  is  paid  upon  income  received  by  the  individual  as  dividends  from  any  cor- 
poration, joint-stock  company,  association,  etc. 

DEDUCTIONS  ALLOWED  NON-RESIDENT  ALIENS 

1.  Necessary  expenses  actually  paid  in  carrying  on  any  business  or  trade  conducted  in 
United  States,  not  including  personal,  living  or  family  expenses. 

2.  Proportion  of  interest  paid  on  indebtedness  (except  that  incurred  for  the  purchase  of 
securities  the  interest  on  which  is  exempt  from  income  tax),  which  the  gross  income  for  the  year 
from  sources  in  the  United  States  bears  to  gross  income  from  all  sources  within  and  without 
United  States.     This  deduction  will  be  allowed  only  if  the  return  includes  all  the  information 
necessary  for  its  calculation. 

3.  Taxes  paid,  imposed  by  United  States,  its  Territories,  or  possessions,  or  by  any  State, 
county,  school  district  or  municipality,  paid  within  United  States,  except  income  and  excess 
profits  taxes  not  including  those  assessed  against  local  benefits. 

Deductions  specified  in  Paragraphs  4,  5,  6,  and  7,  under  the  heading  "Deductions 
Allowed,"  are  also  allowed  in  case  of  non-resident  aliens. 

CREDITS  ALLOWED  NON-RESIDENT  ALIENS 

In  addition  to  credits  allowed  citizens  or  residents  heretofore  specified,  non-resident  aliens 
are  allowed  a  credit  for  income  the  Normal  tax  on  which  has  been  paid  or  withheld  for  payment  at 
the  source  of  the  income. 

A  non-resident  alien  will  be  allowed  deductions  and  credits  provided  for  only  by  filing  a 
true  return  of  his  total  income  from  all  sources  in  United  States.  In  case  of  failure  to  file  such 
return  the  Collector  will  collect  the  tax  on  such  income  and  all  his  property  will  be  liable  to  dis- 
traint for  the  tax. 

GUARDIANS,  TRUSTEES,  ETC.  —RETURNS 

Guardians,  trustees,  executors,  administrators,  receivers,  conservators  and  all  persons,  cor- 
porations or  associations  acting  in  any  fiduciary  capacity  must  make  returns  of  income  of  the 
person,  trust  or  estate  for  whom  or  which  they  act,  the  same  as  individuals,  and  be  subject  to  the 
provisions  which  apply  to  individuals,  providing  such  income  exceeds  $3000. 

PARTNERSHIP  RETURNS 

Persons  carrying  on  business  in  partnership  are  liable  for  Income  tax  only  in  their  individual 
capacity,  and  the  share  of  profits  to  which  the  person  would  be  entitled  if  same  were  divided, 
whether  divided  or  not,  must  be  returned  for  taxation.  From  the  net  distributive  interests  on 
which  the  individual  members  are  liable  to  tax,  both  Normal  and  Additional,  there  is  excluded 
their  proportionate  shares  received  from  interest  on  obligations  of  a  State  or  any  political  or  tax 
subdivision  thereof;  on  obligations  of  the  United  States  (if  and  to  the  extent  specified  in  the  act 
authorizing  the  issue  of  such  obligations  that  they  are  exempt  from  taxation)  or  its  possessions; 
and  on  the  Normal  tax  there  is  allowed  a  credit  for  their  proportionate  shares  of  profits  derived 
from  dividends.  Returns  must  include  income  from  dividends  on  capital  stock  or  from  net  earn- 
ings of  any  corporation,  joint-stock  company  or  association,  or  insurance  company,  except  that  in 
case  of  non-resident  aliens  such  income  derived  from  sources  without  United  States  shall  not  be 
included. 

A  partnership  has  same  privilege  of  fixing  and  making  return  on  the  basis  of  its  own 
fiscal  year  as  corporations. 


WAR     TAX 


RETURNS  REQUIRED 

Every  citizen  or  resident  of  the  United  States  having  a  net  income  of  $1000  or  over  in  case  of 
a  single  person,  and  $2000  or  over  in  case  of  a  married  person,  for  the  taxable  year,  is  required  to 
file  a  return  with  the  Collector  of  Internal  Revenue  of  the  district  on  or  before  March  1,  of  the 
year  following  the  taxable  calendar  year.  If  the  person  making  return  has  no  legal  residence  or 
place  of  business  in  the  United  States,  he  will  file  his  return  with  the  Collector  of  Internal  Revenue 
at  Baltimore,  Md. 

In  case  of  absence,  illness  or  non-residence  of  a  person,  the  return  may  be  made  by 
an  agent,  who  is  responsible  for  its  correctness.  Reasonable  extension  of  time  in  meri- 
torious cases  for  filing  returns  by  persons  residing  or  traveling  abroad  and  who  are  unable 
to  file  their  return  on  or  before  March  1,  will  be  granted 

ASSESSMENT  AND  NOTICE 

The  tax  will  be  assessed  by  the  Commissioner  of  Internal  Revenue  and  all  persons  notified 
of  the  amount  on  or  before  June  1.  The  tax  assessed  must  be  paid  on  or  before  June  IS.  In 
case  of  refusal  or  neglect  to  make  return,  and  in  case  of  erroneous,  false  or  fraudulent  return, 
Commissioner  of  Internal  Revenue,  at  any  time  within  three  years,  will  make  a  return  on  informa- 
tion obtained  and  the  assessment  so  made  must  be  paid  immediately  upon  notification. 

PAYMENTS  IN  ADVANCE 

The  Secretary  of  the  Treasury,  under  rules  and  regulations  prescribed  by  him,  shall  permit 
taxpayers  liable  to  Income  and  Excess  Profits  taxes,  to  make  payments  in  advance  in  installments, 
or  in  whole,  of  an  amount  not  in  excess  of  the  estimated  taxes  which  will  be  due  from  them.  Upon 
final  determination  of  such  taxes  actually  due  any  amount  paid  in  excess  shall  be  refunded. 
PROVIDED,  that  at  least  one-fourth  of  such  estimated  tax  shall  be  paid  before  the  expiration  of  30 
days  after  close  of  the  taxable  year;  at  least  one-fourth  within  two  months  after  close  of  taxable 
year;  at  least  one-fourth  within  four  months  after  close  of  taxable  year,  and  remainder  due  on  or 
before  the  time  now  fixed  by  law  for  such  payment.  Penalties  under  the  old  law  shall  apply  to 
any  failure  to  pay  the  tax.  Interest  on  advance  payments  will  be  credited.  Uncertified  checks 
may  be  received  in  payment  of  these  taxes. 

PENALTY  FOR  DELAY 

To  any  amount  due  and  unpaid  after  June  15,  and  for  ten  days  after  notice  and  demand  by 
the  Collector,  there  will  be  added  5%  on  the  amount  of  tax  unpaid  and  interest  at  the  rate  of  1% 
a  month. 

INFORMATION  AT  THE  SOURCE 

The  provisions  of  the  Act  of  September  8,  1916,  requiring  the  withholding  at  the  source  of 
tax  due  on  profits  or  income  of  resident  taxable  persons,  was  repealed,  except  as  to  income  from 
bonds  containing  the  tax-free  covenant  and  in  its  place  the  law  now  provides  for  "  Information 
at  the  Source"  wherever  the  amount  of  income  received  and  paid  over  to  the  taxable  person  ex- 
ceeds $800  for  any  taxable  year. 

WITHHOLDING  TAX 

1.  All  persons,  corporations  and  others,  and  all  officers  and  employees  of  United  States 
having  custody,  receipt  or  control  of  any  income  of  any  non-resident  alien,  except  dividends  on 
stock  or  from  net  earnings  of  a  corporation  which  is  taxable  upon  its  net  income,  are  required  to 
deduct  and  withhold  a  sum  sufficient  to  pay  the  Normal  Income  tax,  and  shall  make  return 
thereof  on  or  before  March  1  of  each  year.     Sums  so  withheld  must  be  paid  to  the  Collector  for 
the  district  in  which  such  sums  are  withheld.     Persons  withholding  the  tax  are  personally  liable, 
but  they  are  indemnified  against  all  others  for  all  payments  withheld. 

2.  The  normal  tax  shall  also  be  deducted  and  withheld  from  fixed  or  determinable  annual 
or  periodical  income  from  interest  on  bonds  and  mortgages  or  deeds  of  trust  or  other  similar 
obligations  of  corporations,  companies,  associations,  etc.  (if  such  bonds,  etc.,  contain  a  contract 
by  which  the  obligor  agrees  to  pay  any  part  of  the  income  tax  imposed  upon  the  obligee  or  to 
reimburse  him  for  any  part  of  the  tax,  or  to  pay  the  interest  without  deduction  for  any  tax  the 


8  WAR     TAX 


obligor  may  pay  thereon  or  retain  therefrom)  whether  such  interest  is  payable  to  a  non-resident 
alien  individual  or  to  an  individual  citizen  or  resident  of  the  United  States,  subject  to  the  preceding 
paragraph,  unless  the  person  entitled  to  receive  such  interest  shall  file  with  the  withholding  agent 
on  or  before  February  1  a  signed  notice  in  writing  claiming  the  benefit  of  an  exemption  specified 
under  the  head,  "Personal  Exemptions." 

LICENSE  TO  COLLECT  FOREIGN  PAYMENTS 

All  persons,  corporations,  associations  or  partnerships  making  collections  of  foreign  payment 
of  interest  or  dividends,  in  any  form  as  a  matter  of  business,  must  obtain  a  license  from  the 
Commissioner  of  Internal  Revenue.  Attempts  to  make  collections  without  a  license  will  incur  a 
fine  not  exceeding  $5000,  or  imprisonment  not  exceeding  one  year,  or  both. 

The  tax  on  income  not  falling  under  the  foregoing  is  assessed  by  personal  return. 
The  intent  of  this  provision  is  that  all  incomes  defined  above  shall  be  charged  and  as- 
sessed with  the  corresponding  tax,  and  the  tax  paid  by  the  owner  or  the  representative 
having  custody  or  control  of  the  income.  The  liability  will  be  determined  as  to  the  year 
for  which  a  return  is  required.  The  provisions  relating  to  deduction  and  payment  of 
tax  at  the  source  of  income  (except  paragraph  2  under  the  head  "Withholding  Tax"), 
applies  only  to  the  Normal  tax  on  non-resident  alien  individuals. 


War  Income  Tax 

(Effective  from  Jan.  1,  1917) 
ON  CORPORATIONS 

A  tax  of  6%  is  imposed  on  the  total  net  income  received  in  the  preceding  calendar  year,  from 
all  sources,  by  every  corporation,  joint-stock  company,  association  or  insurance  company,  or- 
ganized in  United  States.  Partnerships  are  not  included. 

A  like  tax  of  6%  is  imposed  on  the  total  net  income  received  in  preceding  calendar  year  from 
all  sources  within  the  United  States,  including  interest  on  bonds,  notes  or  other  interest-bearing 
obligations,  by  every  foreign  corporation,  joint-stock  company,  association  or  insurance  company. 
Included  in  this  tax  is  income  from  dividends  on  capital  stock  or  from  net  earnings  of  resident 
corporations,  joint-stock  companies,  associations  or  insurance  companies,  whose  net  income  is 
taxable  under  this  provision. 

"Dividends"  as  here  used  means  any  distribution  made,  or  ordered  to  be  made, 
out  of  earnings  or  profits  accrued  since  March  1,  1913,  and  payable  to  shareholders, 
whether  in  cash  or  in  stock,  which  stock  shall  be  considered  income  to  the  amount  of 
earnings  or  profits  so  distributed.  Any  such  distribution  made  in  19 17  or  subsequent  years 
shall  be  deemed  to  have  been  made  from  the  most  recently  accumulated  undivided 
profits  or  surplus  and  shall  constitute  a  part  of  the  annual  income  of  the  distribution  for 
the  year  in  which  received. 

Amounts  received  as  dividends  are  not  subject  to  the  4%  war  income  tax  on  cor- 
porations, but  this  exception  does  not  apply  to  the  old  2%  corporation  income  tax 
provision. 

UNDISTRIBUTED  INCOME  PAYS  ADDITIONAL  TAX 

In  addition  to  the  Income  tax  there  shall  be  paid  annually  an  additional  tax  of  10%  on  the 
amount  remaining  undistributed  six  months  after  the  end  of  each  calendar  or  fiscal  year  of  the 
total  net  income  of  every  corporation,  joint-stock  company,  or  association,  or  insurance  companyt 
received  during  such  year,  but  not  including  the  amount  of  any  income  taxes  paid  by  it  within  the 
year  imposed  by  the  authority  of  the  United  States. 

This  additional  tax  of  10%  does  not  apply  to  that  portion  of  such  undistributed  net  income 
which  is  actually  invested  and  employed  in  the  business  or  is  retained  for  employment  in  the 
reasonable  requirements  of  the  business,  or  is  invested  in  obligations  of  the  United  States  issued 


WAR     TAX 


after  September  1,  1917.  If  the  Secretary  of  Treasury  ascertains  and  finds  that  any  portion  of 
such  amount  so  retained  at  any  time  for  employment  in  the  business  is  not  so  employed  or  is  not 
reasonably  required  in  the  business  a  tax  of  15%  shall  be  imposed  thereon. 

Foregoing  taxes  shall  apply  to  undistributed  net  income  received  by  every  taxable 
corporation,  joint-stock  company  or  association,  or  insurance  company,  in  1917,  and 
each  year  thereafter,  except  if  it  has  fixed  its  own  fiscal  year,  the  rates  shall  apply  to  the 
proportion  of  undistributed  net  income  returned  for  the  fiscal  year  and  prior  to  December 
31,  1917,  which  the  period  between  January  1,  1917,  and  end  of  such  fiscal  year  bears  to 
the  whole  thereof. 

CONDITIONAL  AND  OTHER  EXEMPTIONS 

Income  received  by  following  is  not  taxable: 

1.  Labor,  agricultural  or  horticultural  organizations. 

2.  Mutual  savings  banks  not  having  a  capital  stock  represented  by  shares. 

3.  Fraternal  beneficiary  societies,  orders  or  associations,  operating  under  the  lodge  system 
or  for  the  exclusive  benefit  of  the  members  of  a  fraternity,  itself  operating  under  the  lodge  system 
and  providing  for  the  payment  of  life,  sick,  accident  or  other  benefits  to  the  members. 

4.  Domestic  building  and  loan  associations  and  cooperative  banks  without  capital  stock 
organized  and  operated  for  mutual  purposes  and  without  profit. 

5.  Cemetery  companies  owned  and  operated  exclusively  for  the  benefit  of  their  members. 

6.  Corporations  or  associations  organized  and  operated  exclusively  for  religious,  charitable, 
scientific  or  educational  purposes,  no  part  of  the  net  income  of  which  inures  to  the  benefit  of  any 
private  stockholder  or  individual. 

7.  Business  leagues,  chambers  of  commerce  or  boards  of  trade,  not  organized  for  profit. 

8.  Civic  leagues  or  organizations  not  organized  for  profit,  but  operated  exclusively  for  the 
promotion  of  social  welfare. 

9.  Clubs  organized  and  operated  exclusively  for  pleasure,  recreation,  and  other  non-profit- 
able purposes. 

10.  Farmers'  or  other  mutual  hail,  cyclone  or  fire  insurance  companies,  mutual  ditch  or 
irrigation  companies,  mutual  or  cooperative  telephone  companies,  or  like  organizations  of  a  purely 
local  character,  income  of  which  consists  solely  of  assessments,  dues  and  fees  collected  from 
members  for  sole  purpose  of  meeting  expenses. 

11.  Farmers',  fruit  growers'  or  like  associations,  organized  and  operated  as  a  sales  agent  for 
the  purpose  of  marketing  the  products  of  its  members  and  turning  back  to  them  the  proceeds, 
less  necessary  selling  expenses. 

12.  Corporations  or  associations  organized  for  the  exclusive  purpose  of  holding  title  to 
property,  collecting  income  therefrom  and  turning  over  entire  amount  thereof,  less  expenses,  to 
an  organization  which  itself  is  exempt  from  the  tax. 

13.  Federal  Land  banks  and  National  Farm  Loan  associations. 

14.  Joint-stock  Land  banks  as  to  income  derived  from  bonds  or  debentures  of  other  joint 
stock  land  banks  or  any  Federal  Land  bank  belonging  to  such  joint-stock  land  bank. 

There  shall  not  be  taxed  under  this  title  any  income  derived  from  any  public  utility 
or  from  the  exercise  of  any  essential  governmental  function  accruing  to  any  State,  terri- 
tory, or  any  political  subdivision  thereof,  nor  any  income  accruing  to  the  Government 
of  the  Philippine  Islands  or  Porto  Rico,  or  of  any  political  subdivisions  of  either. 

DEDUCTIONS  ALLOWED  DOMESTIC  CORPORATIONS,  ETC. 

In  case  of  a  corporation,  joint-stock  company  or  association,  or  insurance  company,  organized 
in  the  United  States  the  net  income  is  ascertained  by  deducting  from  the  gross  income  from  all 
sources — 

1.  All  ordinary  and  necessary  expenses  in  the  maintenance  and  operation  of  its  business 
and  properties,  including  rentals  or  other  payments  required  as  a  condition  to  continued  use  of 
property  to  which  the  corporation  has  not  taken  title  or  in  which  it  has  no  equity. 


10  W  AR    TAX 


2.  All  losses  actually  sustained  charged  off  within  the  year  and  not  compensated  by  insur- 
ance or  otherwise,  including  a  reasonable  allowance  for  exhaustion,  wear  and  tear  of  property, 
arising  out  of  its  use  in  the  business  or  trade. 

(a)  In  case  of  oil  or  gas  wells  a  reasonable  allowance  for  actual  reduction  in  flow  and  pro- 
duction, to  be  ascertained  not  by  the  flush  flow,  but  by  the  settled  production  or  regular  flow. 

(b)  In  case  of  mines  a  reasonable  allowance  for  depletion,  not  to  exceed  the  market  value  in 
the  mine  of  the  product  which  has  been  mined  and  sold  during  the  year. 

3.  Interest  paid  within  year  on  indebtedness  (except  indebtedness  incurred  for  purchase 
of  obligations  or  securities  the  interest  upon  which  is  exempt  from  tax)  and  the  amount  of  such 
indebtedness  not  in  excess  of  the  sum  of  the  entire  amount  of  paid-up  capital  outstanding  at  close 
of  year,  or,  if  no  capital  stock,  entire  amount  of  capital  employed  in  the  business  at  close  of  year 
and  one-half  its  interest-bearing  indebtedness  then  outstanding. 

4.  Taxes  paid  within  year  imposed  by  authority  of  United  States  (except  Income  and  Excess 
Profits  taxes),  or  of  its  Territories,  or  possessions,  or  any  foreign  country,  or  by  any  State,  county, 
school  district  or  municipality,  or  other  taxing  subdivision  of  any  State,  not  including  those 
assessed  against  local  benefits. 

Where  shares  of  capital  stock  are  issued  without  par  or  nominal  value,  the  amount 
of  paid-up  capital  stock  represented  by  such  shares  will  be  the  amount  of  cash  or  its  equi- 
valent paid  or  transferred  to  the  corporation  as  consideration  for  such  shares. 

Preferred  capital  stock  is  not  considered  interest-bearing  indebtedness  and  interest 
or  dividends  paid  on  this  stock  is  not  deductible  from  the  gross  income. 

In  case  of  indebtedness  wholly  secured  by  property  collateral,  tangible  or  intangible, 
the  subject  of  sale  or  hypothecation  in  the  ordinary  business  as  a  dealer  only  in  property 
constituting  such  collateral  or  in  loaning  the  funds  thus  procured,  the  total  interest  paid 
within  the  year  on  such  indebtedness  may  be  deducted  as  part  of  its  expense  of  doing 
business.  Interest  on  such  indebtedness  is  only  deductible  on  the  amount  thereof  not 
in  excess  of  the  actual  value  of  such  property  collateral. 

In  the  case  of  bonds  or  other  indebtedness  which  have  been  issued  with  the  guar- 
anty that  the  interest  payable  thereon  shall  be  free  from  taxation,  no  deduction  for 
payment  of  this  tax  or  any  other  tax  pursuant  to  such  guaranty  shall  be  allowed. 

In  case  of  a  bank,  banking  association,  loan  or  trust  company,  interest  paid  during 
the  year  on  deposits  or  on  moneys  received  for  investment  and  secured  by  interest- 
bearing  certificates  of  indebtedness  issued  by  them  shall  be  deducted. 


DEDUCTIONS  ALLOWED  FOREIGN  CORPORATIONS,  ETC. 

1.  All  ordinary  and  necessary  expenses  actually  paid  out  of  earnings  in  the  maintenance  of 
its  property  within  United  States,  including  rentals  and  other  payments  required  to  be  made  as 
a  condition  to  continued  use  of  the  property,  to  which  the  corporation  has  not  taken  title  or  in 
which  it  has  no  equity. 

2.  All  losses  actually  sustained  within  year  from  business  or  trade  conducted  by  it  within 
United  States  and  not  compensated  for  by  insurance  or  otherwise,  including  reasonable  allowance 
for  exhaustion,  wear  and  tear  of  property  arising  out  of  its  use  or  employment  in  the  business  or 
trade. 

Deductions  in  case  of  oil  and  gas  wells  and  mines  owned  by  foreign  corporations  are 
the  same  as  in  case  of  domestic  corporations. 

3.  Interest  paid  on  indebtedness  (except  indebtedness  incurred  for  purchase  of  obligations 
or  securities  the  interest  upon  which  is  exempt  from  taxation  as  income)  not  in  excess  of  the 
proportion  of  the  sum  of  entire  amount  of  paid-up  capital  stock  outstanding  at  close  of  year, 
or,  if  no  capital  stock,  the  entire  amount  of  capital  employed  in  the  business  at  close  of  year,  and 
one-half  its  interest-bearing  indebtedness  then  outstanding,  which  the  gross  amount  of  its  income 
for  the  year  from  business  transacted  and  capital  invested  within  United  States  bears  to  gross 
amount  of  income  derived  from  all  sources. 

4.  Taxes  paid,  imposed  by  United  States  (except  Income  and  Excess  Profits  taxes),  or  its 
territories  or  possessions,  or  by  any  State,  county,  school  district  or  municipality,  or  other  taxing 
subdivision  of  any  State,  paid  within  United  States,  not  including  those  assessed  against  local 
benefits. 


WAR     TAX  11 


CORPORATION  RETURNS 

Return  must  be  made  and  the  tax  paid  on  net  income  received  in  each  preceding  calendar 
year  ending  December  31.  Any  corporation  may  designate  the  last  day  of  any  month  as  the 
close  of  its  fiscal  year,  and  thus  have  the  tax  payable  for  the  year  ending  on  the  last  day  of  any 
designated  month  instead  of  upon  the  last  day  of  December.  It  must,  however,  give  notice  of 
the  day  designated  as  the  close  of  its  fiscal  year  to  the  Collector  not  less  than  30  days  prior  to 
March  1  of  the  year  in  which  return  would  be  filed  if  made  on  the  basis  of  the  calendar  year. 

DATE  FOR  FILING  RETURNS 

On  or  before  March  1,  1918,  and  every  calendar  year  thereafter,  every  corporation,  joint- 
stock  company  or  association,  or  insurance  company  (or  if  it  has  fixed  its  own  fiscal  year,  then 
within  60  days  after  the  close  of  its  fiscal  year  ending  prior  to  December  31,  1917),  must  render  a 
true  return  of  its  net  income.  The  return  must  be  sworn  to  by  the  president,  vice-president,  or 
other  principal  officer,  and  by  the  treasurer  or  assistant  treasurer,  of  the  concern. 

RETURNS  BY  RECEIVERS  OR  TRUSTEES 

If  receivers,  trustees  in  bankruptcy  or  assignees,  are  operating  a  property  or  business  of  a 
corporation  they  must  make  returns  in  same  manner  as  required  of  such  corporation,  and  pay  the 
tax  in  the  same  manner  as  if  assessed  directly  against  the  corporation  whose  business  they  control. 

WITHHOLDING  TAX  AT  THE  SOURCE 

The  provisions  relating  to  the  tax  required  to  be  deducted  and  withheld  and  paid  to  the  United 
States  from  income  of  non-resident  aliens  from  sources  within  the  United  States  are  applicable 
to  the  tax  on  income  from  interest  on  bonds  and  mortgages  and  deeds  of  trust  or-similar  obligations 
of  domestic  or  other  resident  corporations  by  non-resident  alien  firms,  copartnerships,  companies, 
corporations,  joint-stock  companies  or  associations,  or  insurance  companies,  not  engaged  in 
business  in  the  United  States  and  not  having  any  office  or  place  of  business  therein. 

ASSESSMENT,  NOTIFICATION  AND  PAYMENT 

Taxes  on  corporations,  joint-stock  companies  or  associations,  or  insurance  companies,  will 
be  assessed,  and  they  will  be  notified  of  the  amount  of  their  liability  on  or  before  June.l  of  each 
year,  and  the  tax  must  be  paid  on  or  before  June  15.  If  the  corporation,  joint-stock  company 
or  association,  or  insurance  company,  has  fixed  its  own  fiscal  year,  the  tax  must  then  be  paid  within 
105  days  after  the  date  on  which  it  is  required  to  file  its  return. 

PENALTIES 

Any  person,  corporation,  partnership,  association,  or  insurance  company,  liable  to  pay  the 
tax,  to  make  a  return  or  to  supply  information  required,  who  refuses  or  neglects  to  pay  such  tax, 
to  make  such  return  or  to  supply  such  information  at  the  time  or  times  herein  specified  in  each 
year,  shall  be  liable  (except  as  otherwise  specially  provided)  to  a  penalty  of  not  less  than  $20 
nor  more  than  $1000.  Any  individual  or  any  officer  of  any  corporation,  partnership,  association 
or  insurance  company,  required  by  law  to  make,  render,  sign  or  verify  any  return  or  to  supply 
any  information,  who  makes  any  false  or  fraudulent  return  or  statement  with  intent  to  defeat  or 
evade  the  tax  is  guilty  of  a  misdemeanor  and  shall  be  fined  not  exceeding  $2000  or  be  imprisoned 
not  exceeding  one  year,  or  both. 

DIVIDEND  STATEMENT  BY  CORPORATIONS,  ETC. 

Every  corporation,  joint-stock  company  or  association,  or  insurance  company,  when  re- 
quired, must  render  a  correct,  verified  return  of  its  payments  of  dividends,  made  in  cash  or  in 
stock,  including  names  and  addresses  of  stockholders,  and  number  of  shares  owned  by  each,  and 
the  tax  years  in  which  dividends  were  earned,  and  the  applicable  amounts. 


12  WAR      TAX 


BROKERS*  REPORTS  ON  CUSTOMERS 

Every  person  doing  business  as  a  broker  on  any  exchange  or  board  of  trade  must,  when 
required,  render  a  verified  return  showing  names  of  customers,  with  such  details  as  to  profits, 
losses,  or  other  information  that  may  be  required. 

INFORMATION  AT  THE  SOURCE 

This  provision  requires  all  persons,  corporations,  partnerships,  associations,  insurance 
companies,  lessees  or  mortgagors  of  real  or  personal  property,  trustees  acting  in  any  trust  capacity, 
executors,  administrators,  receivers,  conservators,  and  employers,  making  payment  to  another 
person,  corporation,  partnership,  association,  or  insurance  company,  of  any  moneys  whatsoever 
(other  than  the  payments  specified  in  the  two  preceding  paragraphs),  of  $800  or  more  in  any 
taxable  year;  or  in  case  of  payments  made  by  officers  or  employees  of  United  States  Government, 
having  information  as  to  such  payments,  to  make  return  setting  forth  a  true  statement  of  the 
amount  of  income,  and  the  name  and  address  of  those  receiving  same. 

These  returns  will  be  required  regardless  of  the  amount,  including  cases  of  payment  of 
interest  on  bonds  and  mortgages,  or  deeds  of  trust,  or  other  similar  obligations,  also  in  case  of 
collections  (not  payable  in  United  States)  of  interest  on  bonds  of  foreign  countries;  also  interest 
on  bonds  and  dividends  on  stock  of  foreign  corporations,  by  all  persons  making  a  business  of  such 
collections.  The  name  and  address  of  recipient  of  income  must  be  furnished,  on  damand,  by 
every  person  or  corporation  paying  the  income.  This  applies  to  the  calendar  year  1917,  and  every 
year  thereafter,  but  shall  not  apply  to  the  payment  of  interest  on  obligations  of  the  United  States. 

CREDITS  ALLOWED  FOR  EXCESS  PROFITS  TAX  PAID 

Sums  paid  as  Excess  Profits  tax  (hereafter  explained)  may  be  credited  in  the  return  of  income. 
Nothing  in  the  law  shall  be  construed  as  taxing  income  of  foreign  governments  received  from 
investments  in  the  United  States,  from  stocks,  bonds  or  other  domestic  securities  owned  by  such 
foreign  governments  or  interest  on  bank  deposits  belonging  to  such  governments. 

"DIVIDENDS"  DEFINED,  DISTRIBUTION  MADE 

The  term  "Dividends"  as  used  herein  shall  mean  any  distribution  made  or  ordered  to  be 
made  by  a  corporation,  joint-stock  company,  association  or  insurance  company  out  of  its  earnings 
or  profits  accrued  since  March  1, 1913,  and  payable  to  its  shareholders,  whether  in  cash  or  in  stock 
of  the  corporation,  joint-stock  company,  association  or  insurance  company,  which  stock  dividend 
shall  be  considered  income  to  the  amount  of  the  earnings  or  profits  so  distributed. 

Any  distribution  made  to  the  shareholders  or  members  of  a  corporations,  etc.,  in  1917  or 
subsequent  tax  years,  shall  be  deemed  to  have  been  made  from  the  most  recently  accumulated 
undivided  profits  or  surplus  and  shall  constitute  a  part  of  the  annual  income  of  the  person  re- 
ceiving same  for  the  year  in  which  received  and  be  taxed  to  him  at  the  rates  in  force  for  the  years 
in  which  the  profits  or  surplus  were  accumulated  by  the  corporation,  association,  etc. 

Nothing  herein  shall  be  construed  as  taxing  any  earnings  or  profits  accrued  prior  to  March  1, 
1913,  but  such  earnings  or  profits  may  be  distributed  in  stock  dividends  or  otherwise,  exempt  from 
the  tax,  after  the  distribution  of  earnings  and  profits  accrued  since  March  1,  1913,  has  been  made. 
This  provision  shall  not  apply  to  any  distribution  made  prior  to  August  6,  1917,  out  of  earnings 
or  profits  accrued  prior  to  March  1,  1913. 

Where  any  tax  has  been  paid  by  the  taxpayer  it  shall  not  be  re-collected  from  any 
withholding  agent,  nor  shall  any  penalty  be  imposed  in  such  cases  upon  the  taxpayer 
or  withholding  agent  whose  duty  it  is  to  retain  it,  for  failure  to  return  or  pay  same,  unless 
such  failure  was  fraudulent,  and  to  avoid  payment. 

TO  PREVENT  EVASION 

Premiums  paid  on  life  insurance  policies  covering  the  lives  of  officers,  employees,  or  those 
financially  interested  in  any  trade  or  business  conducted  by  an  individual,  partnership,  corpora- 
tion, or  others,  shall  not  be  deducted  in  computing  the  net  income  of  such  person,  corporation  or 
concern,  or  in  computing  the  profits  of  such  partnership  for  the  purposes  of  claiming  the  benefit 
of  the  exemption  and  the  deductions  allowable  in  the  personal  income  return 


WAR     TAX  13 


War  Estate  Tax 

This  tax  is  assessed  and  levied  on  the  estate  of  a  deceased  person  before  distribution.  It 
}s  imposed  upon  the  transfer  of  the  net  estate  of  every  decedent,  whether  a  resident  or  non- 
resident of  the  United  States.  An  exemption  of  $50,000  is  allowe<4  only  on  the  gross  estate  of 
resident  decedents.  No  exemption  is  allowed  upon  the  gross  estate  of  non-resident  decedents. 

Below  are  the  combined  rates  of  the  old  and  new  laws  between  the  sums  specified. 

Value  of  Net  Estate  Rate  of  Tax  Value  of  Net  Estate  Rate  of  Tax 

Not  in  excess  of  $50,000 2%  2,000,000  to  3.000,000 14% 

50,000  to         150,000 4%  3,000,000  to  4,000,000 16% 

150,000  to         250,000 6%  4,000,000  to  5,000,000 18% 

250,000  to         450,000 8%  5,000,000  to  8,000,000 20% 

450,000  to      1,000,000 10%  8,000,000  to  10,000,000 22% 

1,000,000  to     2,000,000 12%  Over  10,000,000 25% 

This  tax  does  not  apply  to  the  transfer  of  the  net  estate  of  any  decedent  dying  while  serving 
in  the  military  or  naval  forces  during  the  present  War,  or  if  death  results  from  injuries  received  or 
disease  contracted  in  such  service  within  one  year  after  the  President's  proclamation  declaring 
such  war  at  an  end. 

PROCEDURE 

The  executor  or  administrator  of  the  estate  must  give  written  notice  to  the  Collector  of  the 
district  where  the  estate  is  located,  within  30  days  after  qualifying  or  coming  into  possession,  of 
any  property  of  a  resident  or  non-resident  decedent,  in  all  cases  where  the  gross  estate  exceeds 
$60,000,  and  in  case  of  a  non-resident  decedent  any  part  of  whose  estate  is  situated  in  United 
States. 

GROSS  ESTATE  DEFINED 

To  determine  gross  estate,  include  all  real  and  personal  property  conveyed  by  gift  or  in  trust 
in  contemplation  of  death,  and  the  interest  of  decedent  in  property  held  jointly  or  as  tenants  in 
entirety.  Any  transfer  of  a  material  part  of  one's  estate  in  the  nature  of  a  final  disposition,  or 
any  distribution  made  by  decedent  within  two  years  prior  to  death,  will,  unless  otherwise  shown 
to  the  contrary,  be  deemed  to  have  been  made  in  contemplation  of  death,  and,  therefore,  subject 
to  the  tax. 

NET  ESTATE  DEFINED 

1.  The  net  estate  of  a  resident  decedent  is  determined  by  deducting  from  the  gross  estate 
funeral  and  administrative  expenses,  all  claims  against  estate,  unpaid  mortgages,  losses  incurred 
during  settlement  when  not  compensated  for  by  insurance,  support  during  settlement  of  those 
dependent  upon  decedent,  and  such  other  charges  allowed  by  the  laws  of  the  jurisdiction. 

2.  An  exemption  of  $50,000. 

In  case  of  a  non-resident  decedent,  the  net  estate  is  determined  by  deducting  from 
the  value  of  that  part  of  his  gross  estate  which  at  time  of  death  is  situated  in  United 
States  that  proportion  of  deductions  specified  above  in  Paragraph  1  which  the 
value  of  such  part  bears  to  the  value  of  his  entire  gross  estate  wherever  situated.  No 
deduction  is  allowed  unless  the  executor  includes  in  the  return  the  value  at  time  of  non- 
resident's death  of  that  part  of  the  gross  estate  not  situated  in  United  States. 

Stock  in  a  domestic  corporation  owned  and  held  by  a  non-resident  decedent  shall  be 
deemed  property  within  United  States,  and  any  property  of  which  decedent  has  made  a 
transfer  or  with  respect  to  which  he  has  created  a  trust,  shall  be  deemed  to  be  situated 
in  United  States,  if  so  situated  either  at  the  time  of  transfer  or  creation  of  the  trust,  or 
at  the  time  of  his  death. 


14  W  A  R      T  A  X 


PAYMENT 

The  tax  must  be  paid  within  one  year  from  date  of  decedent's  death.  If  paid  prior  thereto 
a  deduction  of  5%  per  annum  for  the  period  between  payment  and  date  due  is  allowed.  If  not 
paid  within  90  days  after  it  is  due  10%  per  annum  interest  will  be  added  from  date  of  dece- 
dent's death.  If  delay  is  due  to  litigation,  the  interest  will  be  6%  per  annum  from  due  date 
until  the  cause  of  delay  is  removed;  thereafter  at  10%  until  paid. 

The  tax  must  be  paid  at  the  office  of  the  Collector  of  the  district  where  decedent  lived,  if 
within  United  States;  otherwise  payment  must  be  made  to  the  Collector  where  the  gross  estate 
is  located.  If  the  estate  is  located  in  two  or  more  districts,  the  tax  is  payable  to  the  Collector 
at  Baltimore,  Md. 

The  executor  must  file  with  the  Collector  a  return,  under  oath,  in  duplicate,  setting  forth 
the  value  of  gross  estate  at  time  of  decedent's  death,  or,  in  case  of  a  non-resident  that  part  of 
gross  estate  situated  in  United  States. 

PENALTIES 

For  knowingly  making  a  false  statement  or  return,  a  fine  not  exceeding  $5,000,  or  imprison- 
ment not  exceeding  one  year,  or  both,  will  be  imposed.  If  the  tax  is  not  paid  within  60  days 
after  it  is  due  (that  is  one  year  and  60  days  after  decedent's  death)  the  Collector  will,  unless 
there  is  cause  for  further  delay,  commence  proceedings  in  United  States  court  to  sell  the  property 
under  judgment,  and  the  tax,  together  with  cost  and  expenses,  must  be  first  paid,  and  the  balance 
deposited  according  to  the  court's  order. 

Unless  the  tax  is  sooner  paid,  it  will  become  a  lien  for  ten  years  on  the  gross  estate,  except 
that  such  part  of  gross  estate  as  is  used  to  pay  charges  against  the  estate  and  expense  of  adminis- 
tration shall  not  be  subject  to  lien. 

War  Excess  Profits  Tax 

(Effective  from  Jan.  1,  1917) 

This  is  a  new  tax  upon  excess  incomes  of  corporations,  and  partnerships,  and  the  business  of 
individuals.  The  law  of  March  3,  1917,  is  repealed.  The  average  net  profits  for  the  years  1911, 
1912,  and  1913,  called  the  "Prewar  Period,"  are  taken  as  the  basis  of  deduction  in  the  comput- 
ation of  the  war  excess  profits. 

In  arriving  at  the  excess  profits  an  exemption  from  the  net  income,  as  shown  by  the  income 
tax  returns,  of  the  same  percentage  of  the  invested  capital  as  was  earned  during  the  prewar  period, 
but  not  less  than  7%  nor  more  than  9%  of  the  actual  capital  invested,  is  allowed.  Domestic 
partnerships  and  citizens  or  residents  of  the  United  States  are  allowed,  in  addition,  a  flat  deduc- 
tion of  $6000,  and  all  domestic  corporations  a  flat  deduction  of  $3000.  No  such  deduction  is 
allowed  foreign  corporations  or  partnerships,  or  non-resident  alien  individuals,  but  the  tax  doos 
not  apply  in  cases  where  the  income  of  such  foreign  corporation,  partnership  or  individual  is  less 
than  $3000. 

LIABILITY  FOR  TAX 

This  tax  applies  to  all  trades  or  businesses  of  whatever  description  (whether  continuously 
carried  on  or  not)  EXCEPT  : 

(a)  Compensation  or  fees  received  by  officers  and  employees  of  the  United  States,  or  any 
State,  Territory,  the  District  of  Columbia,  or  any  subdivision  .thereof. 

(b)  Corporations  exempt  from  federal  income  tax  and  partnerships  and  individuals  carry- 
ing on  a  similar  business. 

(c)  Incomes'derived  from[the  business  of  life,  health,  and  accident  insurance  combined  in  one 
policy  issued  on  the  weekly  premium  payment  plan. 

All  the  trades  and  businesses  in  which  a  corporation  or  partnership  is  engaged  shall 
be  deemed  to  be  a  single  trade  or  business,  and  all  its  income  from  whatever  source  de- 
rived shall  be  deemed  to  be  received  from  such  trade  or  business. 


A  R      T  A  X 


15 


GRADUATED  RATES 

The  tax  is  levied  upon  the  net  income  in  excess  of  the  deduction  allowed,  equal  to  the 
following  percentages: 

Twenty  per  cent  of  the  amount  of  the  net  income  in  excess  of  the  total  deduction  and  not  in 
excess  of  fifteen  per  cent  of  the  invested  capital  for  the  taxable  year. 

Twenty-five  per  cent  of  the  amount  of  the  net  income  in  excess  of  fifteen  per  cent  and  not  in 
e*xcess  of  twenty  per  cent  of  such  capital. 

Thirty-five  per  cent  of  the  amount  of  the  net  income  in  excess  of  twenty  per  cent  and  not 
in  excess  of  twenty-five  per  cent  of  such  capital. 

Forty-five  per  cent  of  the  amount  of  the  net  income  in  excess  of  twenty-five  per  cent  and  not 
in  excess  of  thirty-three  per  cent  of  such  capital. 

Sixty  per  cent  of  the  amount  of  the  net  income  in  excess  of  thirty-three  per  cent  of  such 
capital. 

The  following  tabular  statement  presents  these  rates  in  condensed  form: 

Percentage  of  Deduction  Tax  Rate 

More  than  the  deduction  and  not  more  than  15% 20% 

More  than  15%  and  not  more  than  20% 25% 

More  than  20  %  and  not  more  than  25  % 35  % 

More  than  25%  and  not  more  than  33% 45% 

More  than  33% 60% 

DEDUCTIONS  ALLOWED 

Domestic  corporations:  $3000  and  an  amount  equal  to  the  same  percentage  of  the  invested 
capital  for  the  taxable  year  which  the  average  amount  of  annual  net  income  of  the  trade  or 
business  during  the  prewar  period  was  of  the  invested  capital  for  the  prewar  period  (but  not  less 
than  seven  nor  more  than  nine  per  cent  of  the  invested  capital  for  the  taxable  year). 

Domestic  partnerships  or  citizens  or  residents:  $6000  and  an  amount  equal  to  the  same 
percentage  of  the  invested  capital  for  the  taxable  year  which  the  average  amount  of  the  annual 
net  income  of  the  trade  or  business  during  the  prewar  period  was  of  the  invested  capital  for  the 
prewar  period  (but  not  less  than  seven  nor  more  than  nine  per  cent  of  the  invested  capital  for  the 
taxable  year). 

Foreign  corporations,  partnerships  or  non-resident  alien  individuals:  An  amount  ascer- 
tained in  the  same  manner  as  in  the  foregoing  paragraphs,  but  without  any  exemption  of  $3000 
or  $6000. 


EXAMPLE  No.  1. 

To  show  the  application  of  the  above  provision  let  us  assume  the  following  conditions: 
A  corporation  with  average  prewar  profits  of  $10,000,  and  a  profit  for  the  taxable  year  of 
$30,000,  with  a  capital  of  $100,000  for  both  the  prewar  period  and  the  taxable  year. 

Capital  for  both  taxable  year  and  prewar  period $100,000 

Average  net  income  for  prewar  period , 10,000 

Net  income  for  taxable  year 30,000 

Per  cent  of  prewar  profit  to  capital,  10%.     Maximum  deduction  9  %  of  capital 

for  taxable  year  ($9000)  and  $3000 12,000. . 

Amount  subject  to  tax 18,000 


Amount  in  excess  of  deduc- 
tion and  not  in  excess  of 
15%  of  capital  for  taxable 

year 

15%  to  20%  of  such  capital 
20%  to  35%  of  such  capital 
25%  to  33%  of  such  capital 


Amount 
Taxable 

$3000 

5000 
5000 
5000 


Tax 
Rate 

20% 

Tax 
$  600 

25% 

1250 

35%          

1750 

45%.  . 

.  2250 

Total..  ..$18,000 


$5850 


INCOME   TAX   TABLE   AS 

NORMAL  TAX 

ADDITIONAL  OR  S 

N 

New 

Old  and  New 

NET 

2% 

4% 

1% 

2% 

3% 

4% 

5% 

8% 

12% 

17% 

INCOME 

On  Excess 

On  Excess 

$5,000 

$7,500 

$10,003 

$12,500 

$15,000 

$20,000 

$40,000 

$60,000 

of. 

of 

to 

to 

to 

to 

to 

to 

to 

to 

$2,000 

$4,000 

$7,500 

$10,000 

$12,500 

$15,000 

$20,000 

$40,009 

$60,000 

$80,000 

$       2,000 

$ 

$     V 

f 

3,000 

20.00 

: 
*    V 

4,000 

40.00 

5,000 

40.00 

40.00 

7,500 

40.00 

140.00 

$25.00 

10,000 

40.00 

240.00 

.    25.00 

$50.00 

12,500 

40.00 

340.00 

25.00 

50.00 

$75.00 

15,000 

40.00 

440.00 

25.00 

50.00 

75.00 

$100.00 

20,000 

40.00 

640.00 

25.00 

50.00 

75.00 

100.00 

$250.00 

25,000 

40.00 

840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

$400.00 

30,000 

40.00 

1,040.00 

25.00 

50.00 

75.00 

100.00 

250.00 

800.00 

40,000 

40.00 

1,440.00 

25.00 

50.00;^ 

.75.00 

100.00 

253.00 

1,600.00 

50,000 

40.00 

1,840.00 

25.00 

50.00    . 

'  75.00 

100.00 

259.00 

1,600.00 

$1,200.00 

60,000 

40.00 

2,240.00 

25.00 

50.00 

•'   75.00 

100.00 

250.00 

1,600.00 

2,400.00 

70,000 

40.00 

2,640.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

$1,700.00 

80,000 

40.00 

3,040.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

90,000 

40.00 

3,440.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

100,000 

40.00 

3,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

110,000 

40.00 

4,240.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

125,000 

40.00 

4,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

135,000 

40.00 

5,240.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

150,000 

40.00 

5,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

160,000 

40.00 

6,240.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

170,000 

40.00 

6,640.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

180,000 

40.00 

7,040.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

200,000 

40.00 

7,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

225,000 

40.00 

8,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

250,000 

40.00 

9,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

275,000 

40.00 

10,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

300,000 

40.00 

11,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

350,000 

40.00 

13,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

400,000 

40.00 

15,840.00 

25.00 

50.00 

75.00 

100.00 

250  00 

1,600.00 

2,400.00 

3,400.00 

450,000 

40.00 

17,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

500,000 

40.00 

19,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

550,000 

40.00 

21,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

600,000 

40.00 

23,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

650,000 

40.00 

25,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

700,000 

40.00 

27,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

750,000 

40.00 

29,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

800,000 

40.00 

31,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

900,000 

40.00 

35,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

1,000,000 

40.00 

39,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

1,500,000 

40.00 

59,840.00 

25.00 

50.00 

75.00 

100.00 

250.00 

1,600.00 

2,400.00 

3,400.00 

2,000,000 

40.00 

79,840.00 

25.00 

50.00 

75.00 

100.  0 

250.00 

1,600.00 

2,400.00 

3,400.00 

On  all  sums  in  excess  of  $2,000,000  the  rate  is  63%.    EXEMPTIONS:  Married  man  $2000,  unmarried  man  $11 


PPLIED    TO    INDIVIDUALS 

OC,  COMBINING  BOTH  OLD  AND  NEW  RATES 

2% 

27% 

.31% 

37% 

42% 

46% 

50% 

55% 

61% 

62% 

TOTAL 

TAV 

),000 

$100,000 

$150,000 

$200,000 

$250,000 

$300,000 

$500,000 

$750,000 

$1,000,000 

$1,500,000 

to 

to 

to 

to 

to 

to 

to 

to 

to 

to 

10,000 

$150,000 

$200,000 

$250,000 

$300,000 

$500,000 

$750,000 

$1,  000,0-0 

$1,500,000 

$2,000,000 

$ 

20.00 

40.00 

80.00 

205.00 

355.00 

530.00 

730.00 

1,180.00 

1,780.00 

2,380. 

3,580. 

5,180. 

6,780. 

8,880. 

10,980. 

)0.00 

13,580. 

)0.00 

16,180. 

)0.00 

$  2,700.00 

19,280.00 

)0.00 

6,750.00 

23,930.00 

)0.00 

9,450.00 

27,030.00 

(0.00 

13,500.00 

31,680.00 

10.00 

13,500.00 

$  3,100.00 

35,180.00 

10.00 

13,500.00 

6,200.00 

38,680.00 

10.00 

13,500.00 

9,300.00 

42,180.00 

10.00 

13,500.00 

15,500.00 

49,180.00 

10.00 

13,500.00 

15,500.00 

$  9,250.00 

59,430.00 

to.  oo 

13,500.00 

15,500.00 

18,500.00 

69,680.00 

10.00 

13,500.00 

15,500.00 

18,500.00 

$10,500.00 

81,180.00 

to.  oo 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

92,680.00 

10.00 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

$23,000.00 

117,680.00 

10.00 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

46,000.00 

142,680.00 

>0.  00 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

69,000.00 

167,680.00 

to.  oo 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

92,000.00 

192,680.00 

10.00 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

92,000.00 

$  25,000.00 

219,680.00 

10.00 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

92,000.00 

50,000.00 

246,680.00 

•0.  00 

13,500,00 

15,500.00 

18,500.00 

21,000.00 

92,000.00 

75,000.00 

273,680.00 

10.00 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

92,000.00 

100,000.00 

300,680.00 

to.  oo 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

92,000.00 

125,000.00 

327,680.00 

to.  oo 

13,500.00 

15,500.00 

18.500.00 

21,000.00 

92,000.00 

125,000.00 

$  27,500.00 

357,180.00 

to.  oo 

13,500.00 

15,500.00 

18,500.00 

21,009.00 

92,000.00 

125,000.00 

82.500.00 

416,180.00 

10.00 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

92,000.00 

125,000.00 

137,500.00 

475,180.00 

to.  oo 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

92,000.00 

125,000.00 

137,500.00 

$305,000.00 

800,180.00 

10.00 

13,500.00 

15,500.00 

18,500.00 

21,000.00 

92,000.00 

125,000.00 

137,500.00 

305,000.00 

$310,000.00 

1,130,180.00 

This  table  is  based  on  a  married  man's  exemption.    To  ascertain  unmarried  man's  tax  add  $40  to  total  tax. 


18 


W AR      TAX 


EXAMPLE  No.  2 

If  during  the  prewar  period  the  average  net  income  was  less  than  an  amount  equal  to  7% 
of  the  capital  for  the  taxable  year  the  deduction  allowed  is  7%. 

To  show  the  application  of  this  provision,  let  us  assume  the  following  conditions:  A  corpora- 
tion with  average  prewar  profits  of  $5000  and  taxable  year  profits  of  $15,000,  with  a  capital  for 
both  periods  of  $100,000. 

Capital  for  both  periods $100,000 


Net  income  for  taxable  year  

15,000 
5,000 

10,000 
5,000 

Tax 

$1000 

Average  net  income  for  prewar  period  .  . 

Per  cent  of  prewar  profits  to  capital,  5%. 
for  taxable  year  ($7000)  and  $3000 
Amount  subject  to  tax  

Minimum  deduction,  7%  of  capital 

Amount  in  excess  of  deduction  and  not 
of  capital  for  taxable  year 

in  excess  of  15% 

Amount 
Taxable      Tax  Rate 

$5000        20% 

Total 


$5000 


$1000 


EXAMPLE  No.  3 

Let  us  assume  conditions  involving  a  change  in  the  amount  of  capital. 

A  corporation  with  prewar  profits  of  $8000  on  a  capital  of  $100,000,  and  taxable  year  profits 
of  $25,000  on  a  capital  of  $150,000. 

Capital  for  prewar  period $100,000 

Capital  for  taxable  year 150,000 

Net  income  for  taxable  year 25,000 

Average  net  income  for  prewar  period 8,000 

Per  cent  of  prewar  profits  to  capital,  8%. 

Per  cent  of  taxable  year  profits  to  capital,  16^3%. 

Deduction,  8%  of  capital  for  taxable  year,  ($12,000),  and  $3,000 15,000 

Amount  subject  to  tax 10,000 


Amount  in  excess  of  deduction  and  not  in  excess  of  15%  of 

capital  for  taxable  year 

15%  to  20%  of  such  capital 


Amount 
Taxable 

$7500 
2500 


Tax 
Rate 

20% 

25% 


Tax 

$1500 
625 


Total 


$10,000 


$2125 


EXAMPLE  No.  4 

Partnerships  and  individuals  are  allowed  a  flat  deduction  of  $6000  in  addition  to  the  percent- 
age deduction.  Let  us  assume  the  following  conditions ; 

A  partnership  with  prewar  profits  of  $12,000  and  taxable  year  profits  of  $18,000,  with  a  capita 
of  $100,000  for  both  periods. 


Capital  for  both  periods 

Net  income  for  taxable  year 

Average  net  income  for  prewar  period 

Per  cent  of  prewar  profits  to  capital,  12%. 

Maximum  deduction,  9%  of  capital  for  taxable  year  ($9000)  and  $6000  .  . 


Amount  in  excess  of  deduction  and  not  in  excess  of 
of  capital  for  taxable  year  
15%  to  20%  of  such  capital 

15% 

Amount 
Taxable 

$0000 
$3000 

Tax 
Rate 

25% 

Total 


$3000 


$100,000 
18,000 
12,000 

15,000 
3,000 

Tax 

$750.00 
$750 .00 


W  A  R      T  A  X 


19 


EXAMPLE  No.  5 

In  order  to  show  the  tax  on  the  larger  war  incomes  let  us  assume  the  following  conditions: 
A  corporation  with  prewar  profits  of  $100,000  and  taxable  year  profits  of  $300,000,  with  a 
capital  of  $1,000,000  for  both  periods. 


Net  income  for  taxable  year                             .  .      .    . 

300  000 

Average  net  income  for  prewar  period  

100  000 

Per  cent  of  prewar  profits  to  capital,  10%. 
Maximum  deduction,  9%  of  capital  for  taxable  year 
Amount  subject  to  tax 

($90,000)  and 

$3,000  .  . 

93,000 
207  000 

Amount  in  excess  of  deduction  and  not  in  excess  of  15' 
of  capital  for  taxable  year  

Amount 
%            Taxable 

$57,000 

Tax 
Rate 

20% 

Tax 

$11,400 

15%  to  20%  of  such  capital  

50,000 

25% 

12,500 

20%  to  25%  of  such  capital 

50,000 

35% 

17500 

25%  to  33%  of  such  capital                                      .    . 

50,000 

45% 

22500 

Total.. 


$207,000 


$63,900 


IF  NOT  IN  BUSINESS  DURING  PREWAR  PERIOD 

If  a  corporation  or  partnership  was  not  in  existence,  or  an  individual  was  not  engaged  in 
business  during  the  whole  of  any  calendar  year  of  the  prewar  period,  the  deduction  shall  be  an 
amount  equal  to  eight  per  cent  of  the  invested  capital  for  the  taxable  year,  plus  in  the  case  of  a 
domestic  corporation  $3000,  and  in  the  case  of  a  domestic  partnership  or  a  citizen  or  resident  of  the 
United  States  $6000. 

In  case  of  a  foreign  corporation   or  partnership  or  non-resident  alien,  the  net  income 
from  sources  in  the  United  States  during  the  year  is  used  as  the  basis  of  computation. 


INVESTED  CAPITAL  DEFINED 

The  term ' '  invested  capital ' '  used  in  the  War 
Excess  Profits  section  does  not  include  money  or 
other  property  borrowed,  or  stocks,  bonds  (other 
than  those  of  the  United  States)  or  other  assets, 
the  income  from  which  is  not  subject  to  tax  un- 
der the  War  Excess  Profits  section,  and  means, 
subject  to  the  above  limitations: 

In  the  case  of  a  corporation  or  partnership 
—  (1)  Actual  cash  paid  in,  (2)  actual  cash  value 
of  tangible  property  paid  in  other  than  cash  for 
stock  or  shares  in  such  corporation  or  partner- 
ship at  the  time  of  such  payment  (but  in  case 
such  tangible  property  was  paid  in  prior  to  Jan- 
uary 1,  1914,  the  actual  cash  value  of  such  prop- 
erty on  January  1,  1914,  but  in  no  case  to  exceed 
the  par  value  of  the  original  stock  or  shares  is- 
sued therefor),  and  (3)  paid  in  or  earned  surplus 
and  undivided  profits  used  or  employed  in  the 
business,  exclusive  of  undivided  profits  earned 
during  the  taxable  year.  Actual  cash  value  of 
patents  and  copyrights  paid  in  for  stock  or  shares, 
at  the  time  of  such  payment,  shall  be  included 
but  not  to  exceed  the  par  value  of  such  stocks 
and  shares  at  the  time  of  such  payment.  Good 


! 

CONDENSED  INCOME  TAX  TABLE  FOR  ASCERTAIN- 

ING THE  PERCENTAGE  OF  TAX  BETWEEN 

THE  SUMS  BELOW  SPECIFIED. 

Old 

Law 

New  Law 

Exemptions: 

Heads  of  family  

$4,000 

$2,000 

Other  persons  
For  each  minor  dependent  child  . 

3,000 
0 

1,000 
200 

Rate 

Total 

Per 

Per 

Per 

Cent 

Cent 

Cent 

Normal  rate  

2 

2 

4 

Additional  tax  rate  on  the  amount 

of  income  in  excess  of  — 

$5,000  and  not  of      $7,500... 

0 

1 

1 

7,500                       10,000.  .  .  . 

0 

2 

2 

10",000                       12,500.  .  . 

0 

3 

3 

12,500                        15,000.  .  . 

0 

4 

4 

15,000                        20,000.  .  . 

0 

5 

5 

20,000                        40,000.... 

1 

7 

8 

40,000                        60,000.... 

2 

10 

12 

60,000                       80,000... 

3 

14 

17 

80,000                      100,000.... 

4 

18 

22 

100,000                       150,000... 

5 

22 

27 

150,000                      200,000.... 

6 

25 

31 

200,000                      250,000.... 

7 

30 

37 

250,000                      300,000.... 

8 

34 

42 

300,000                      500,000  ... 

9 

37 

46 

500,000                      750,000.  .  . 

10 

40 

50 

750,000                    1,000,000.  .  . 

10 

45 

55 

1,000,000                    1,500,000.  .  . 

11 

50 

61 

1,500,000                   2,000,000.  .  . 

12 

50 

62 

over                          2,000,000.  .  .  . 

13 

50 

63 

20  W  A  R      TAX 


will,  trade  marks,  trade  brands,  the  franchise  of  a  corporation  or  partnership,  or  other  intangible 
property,  shall  be  included  if  the  corporation  or  partnership  made  payment  bonafide  therefor 
specifically  as  such  in  cash  or  tangible  property,  the  value  not  to  exceed  the  actual  cash  or  actual 
cash  value  of  the  tangible  property  paid  therefor  at  the  time  of  payment;  but  good  will,  trade 
marks,  trade  brands,  franchises,  or  other  intangible  property,  bona  fide  purchased  prior  to  March 
3,  1917,  for  and  with  interests  or  shares  in  a  partnership  or  for  and  with  shares  in  the  capital 
stock  of  a  corporation  (issued  prior  to  March  3,  1917),  in  an  amount  not  to  exceed,  on  March 
3,  1917,  twenty  per  cent  of  the  total  interests  or  shares  in  the  partnership  or  of  the  total  shares 
of  the  capital  stock  of  the  corporation,  shall  be  included  at  a  value  not  to  exceed  the  actual 
cash  value  at  the  time  of  such  purchase,  and  in  case  of  issue  of  stock  therefor  not  to  exceed  the 
par  value  of  such  stock. 

In  the  case  of  an  individual — (1)  Actual  cash  paid  into  the  trade  or  business,  (2)  the  actual 
cash  value  of  tangible  property  paid  into  the  trade  or  business,  other  than  cash,  at  the  time  of 
such  payment  (but  if  such  tangible  property  was  paid  in  prior  to  January  1,  1914,  the  actual 
cash  value  on  January  1,  1914),  and  (3)  actual  cash  value  of  patents,  copyrights,  good  will,  trade 
marks,  trade  brands,  franchises,  or  other  intangible  property,  paid  into  the  trade  or  business, 
at  the  time  of  such  payment,  if  payment  was  made  therefor  specifically  as  such  in  cash  or  tangible 
property,  not  to  exceed  the  actual  cash  value  of  the  tangible  property  bona  fide  paid  therefor  at 
the  time  of  such  payment. 

Invested  capital  for  any  year  means  the  average  invested  capital  for  the  year,  averaged 
monthly. 

SUBNORMAL  PROFITS 

If  the  Secretary  of  the  Treasury,  upon  complaint,  finds  either  (1)  that  during  the  prewar  period 
domestic  corporation  or  partnership,  or  a  citizen  or  resident  of  the  United  States,  had  no  net 
income  from  the  trade  or  business,  or  (2)  that  during  the  prewar  period  the  percentage,  which  the 
net  income  was  of  the  invested  capital,  was  low  as  compared  with  the  percentage  which  the  net 
income  during  such  period  of  representative  corporations,  partnerships  and  individuals  engaged 
in  a  like  or  similar  trade  or  business  was  of  their  invested  capital,  then  the  deduction  shall  be  an 
amount  equal  to  the  same  percentage  of  its  invested  capital  for  the  taxable  year  which  the  average 
deduction  (determined  in  the  manner  heretofore  set  forth)  for  such  year  of  representative  corpora- 
tions, partnerships  or  individuals  engaged  in  a  like  or  similar  trade  or  business  is  of  their  average 
invested  capital  for  such  year,  plus,  in  the  case  of  a  domestic  corporation  $3000,  and  in  the  case 
of  a  domestic  partnership  or  a  citizen  or  resident  of  the  United  States  $6000.  In  casos  where 
the  Secretary  of  the  Treasury  is  unable  satisfactorily  to  determine  the  invested  capital  the  amount 
of  the  deduction  shall  be  determined  in  the  manner  set  forth  in  this  paragraph. 

This  means  that  where  a  concern  through  accident  or  misfortune  made  subnormal 
profits  during  the  prewar  period  as  compared  with  its  competitors,  such  concern  shall  be 
placed  upon  the  same  basis  with  its  more  fortunate  competitors. 

BUSINESS  WITH  NOMINAL  CAPITAL 

The  limitation  of  the  deduction  to  7%  or  9%  of  the  capital  invested  does  not  apply  in  the 
case  of  a  trade  or  business  which  is  chiefly  carried  on  by  means  of  personal  services  and  in  which 
the  capital  is  only  nominal  as  compared  with  the  gross  income. 

CLAIM  FOR  ABATEMENT 

The  tax  shall  be  assessed  upon  the  basis  of  the  war  excess  profits  determined,  as  illustrated  in 
Examples  1,2,  3,  4,  and  5,  but  the  taxpayer  claiming  the  benefit  of  the  subnormal  provisions  may, 
at  the  time  of  making  his  return,  file  a  claim  for  abatement  of  the  amount  by  which  the  tax  so 
assessed  exceeds  the  tax  that  would  be  payable  under  the  subnormal  provision.  In  such  event 
collection  of  the  part  of  the  tax  covered  by  such  claim  for  abatement  shall  not  be  made  until  the 
claim  is  decided,  but  the  Commissioner  of  Internal  Revenue  may  require  the  claimant  to  give 


W  AR     TAX  .  21 


a  bond  conditioned  for  the  payment  of  any  tax:  found  to  be  due,  with  interest  thereon.  If  such 
bond  satisfactory  to  the  Commissioner  is  not  given  within  such  time  as  he  prescribes,  the  full 
amount  of  tax  assessed  shall  be  collected.  Upon  final  decision  if  the  tax  has  been  overpaid  such 
over-payment  shall  be  refunded. 

RETURNS  —  PARTNERSHIPS 

Every  foreign  partnership  having  a  net  income  of  $3000  or  more  for  the  taxable  year  and  every 
domestic  partnership  having  an  income  of  $6000  or  more  for  the  taxable  year,  shall  render  a 
complete  return.  Such  returns  shall  be  rendered  at  the  same  time  and  in  the  same  manner  and 
form  as  is  now  prescribed  for  income  tax  returns. 

All  provisions  relating  to  returns  and  payment  of  the  tax  imposed,  including  pen- 
alties under  the  Income  Tax  Law,  are  made  applicable  to  the  War  Excess  Profits  tax. 

NO  INVESTED  CAPITAL 

If  a  trade  or  business  has  no  invested  capital  or  not  more  than  a  nominal  capital,  it  will 
pay,  in  addition  to  all  othe-*  taxes,  in  lieu  of  the  tax  imposed  by  the  graduated  rates  herein 
specified,  a  tax  equal  to  8%  of  the  net  income  thereof  in  excess  of  the  $3,000  in  case  of  a  domes- 
tic corporation,  and  $6,000  in  case  of  a  domestic  partnership  or  citizen  or  resident. 


War  Tax  on  Beverages 

(In  effect  on  passage  of  Act) 

The  rates  given  here  include  both  the  old  and  the  new  taxes.  No  reference  need  be  had  to 
old  laws  in  effect  prior  to  the  passage  of  the  War  Tax  law. 

DISTILLED  SPIRITS 

All  distilled  spirits  in  bond,  or  that  may  have  been,  or  may  hereafter  be  produced  in,  or 
imported  into,  the  United  States,  must  pay  a  tax  of  $2.20  on  each  proof  gallon,  or  wine  gallon 
when  below  proof.  A  proportionate  tax  at  a  like  rate  must  be  paid  on  fractional  parts  of  a 
gallon.  If  the  distilled  spirits  are  intended  for  beverage  purposes  or  for  the  production  of  other 
beverages,  the  tax  is  $3.20  a  proof  gallon,  or  wine  gallon  when  below  proof. 

This  tax  must  be  paid  by  the  distiller  or  importer  when  the  liquor  is  withdrawn. 

BEER,  ALE,  PORTER,  ETC. 

On  all  beer,  lager  beer,  ale,  porter  and  other  similar  fermented  liquor  containing  one-half 
per  cent  or  more  of  alcohol,  a  tax  of  $3 .for  each  barrel  containing  not  more  than  31  gallons,  and 
a  like  rate  for  fractional  parts  of  a  barrel,  is  imposed. 

STILL  WINES,  VERMUTH,  ETC. 

All  still  wines,  including  vermuth,  liqueurs,  cordials,  artificial  or  imitation  wines,  or  com- 
pounds sold  as  wine,  produced  in  or  imported  into  the  United  States,  or  under  control  of  the  pro- 
ducer, holder,  dealer,  or  compounder,  must  pay  a  tax  as  follows: 

Wine  containing  not  more  than  14%  alcohol,  8  cents  a  wine  gallon. 

Wine  containing  more  than  14%  and  not  more  than  21%  alcohol,  20  cents  per  wine  gallon. 
Wine  containing  more  than  21%  and  not  more  than  24%  absolute  alcohol,  50  cents  per 
wine  gallon. 

Liqueurs,  cordials,  and  similar  compounds,  3  cents  per  half  pint. 

All  wines  containing  more  than  24%  absolute  alcohol  by  volume  are  classed  as 
distilled  spirits,  and  are,  therefore,  taxed  as  such. 

PERFUMES 

All  perfumes  imported  containing  distilled  spirits  must  pay  a  tax  of  $1.10  per  wine  gallon 
in  addition  to  the  customs  tax,1  and  a  proportionate  tax  at  a  like  rate  on  fractional  parts  of  a 
wine  gallon. 


22  W  A  R     TAX 


DISTILLED   SPIRITS   ON  HAND 

A  tax  of  $2.10  on  each  proof  gallon  is  imposed  on  all  distilled  spirits  intended  for  beverage 
purposes,  produced  in  or  imported  into  the  United  States,  on  which  the  tax  has  been  paid  and 
which,  on  the  day  this  law  was  passed,  was  held  by  a  retailer  in  excess  of  50  gallons  in  the  aggre- 
gate, or  by  any  other  person,  corporation,  partnership  or  association  in  any  quantity,  in  any 
form,  and  which  are  intended  for  sale.  Where  such  spirits  are  not  intended  for  beverage  pur- 
poses the  tax  will  be  $1.10  a  gallon. 

RECTIFYING  SPIRITS  TAX 

In  addition  to  all  other  taxes  there  is  a  tax  of  15  cents  per  proof  gallon  on  all  distilled  spirits 
or  wine,  hereafter  rectified,  purified,  or  refined  in  such  manner,  and  on  all  mixtures  hereafter 
produced  in  such  manner  that  the  person  so  rectifying,  purifying,  refining  or  mixing  them  is  a 
rectifier  in  the  meaning  of  the  law,  and  also  on  all  such  articles  in  possession  of  the  rectifier  the 
day  this  law  passed. 

The  special  tax  of  15  cents  a  gallon  does  not  apply  to  cordials  or  liqueurs,  nor  to  the 
mixing  and  blending  of  wines  where  the  blending  is  for  the  sole  purpose  of  perfecting  wines 
according  to  commercial  standards,  nor  to  blends  made  exclusively  of  two  or  more 
pure  straight  whiskies  aged  in  wood  not  less  than  four  years  and  without  the  addition  of 
coloring  or  flavoring  matter  or  any  other  substance  than  pure  water,  and  if  not  reduced 
below  90  proof.  Such  blended  whiskies  shall  be  exempt  from  this  tax  only  when  com- 
pounded under  the  immediate  supervision  of  a  revenue  officer.  When  rectification  is 
completed  and  the  tax  of  15  cents  a  proof  gallon  is  paid,  it  is  unlawful  for  the  rectifier  or 
other  dealer  to  reduce  in  proof  or  increase  in  volume.  The  rectifier  may,  however,  use 
again  in  rectification  such  spirits  already  rectified  and  on  which  the  tax  is  paid. 

No  distilled  spirits  produced  after  the  passage  of  this  act  shall  be  imported  into  the 
United  States  from  any  foreign  country,  or  from  the  West  Indian  islands  recently  ac- 
quired from  Denmark  (unless  produced  from  products  the  growth  of  such  islands,  and 
not  then  into  any  State  or  Territory  or  district  of  the  United  States  in  which  the  manu- 
facture or  sale  of  intoxicating  liquor  is  prohibited),  or  from  Porto  Rico  or  the  Philippine 
Islands.  This  shall  not  apply  to  distilled  spirits  imported  for  other  than  beverage 
purposes  or  use  in  the  manufacture  of  or  production  of  any  article  used  as  a  beverage. 

CHAMPAGNE  AND   OTHER   SPARKLING   WINES 

On  all  champagnes  and  other  sparkling  wines,  6  cents  per  half  pint;  and  on  all  artificially 
carbonated  wines,  3  cents  per  half  pint. 

If  any  dealer  had  on  hand  any  still  wines,  vermuth,  champagne  or  other  sparkling 
/ines,  liqueurs,  cordials,  artificial  or  imitation  wines,  in  excess  of  25  gallons,  on  the  day 
of  the  passage  of  this  law,  on  which  he  had  already  paid  the  old  tax,  he  must  pay  a  tax 
equal  to  the  difference  between  the  old  tax  and  the  total  tax  above  specified. 

GRAPE  BRANDY 

On  all  grape  brandy  or  wine  spirits  withdrawn  by  the  producer  of  wines  from  any  fruit 
distillery  or  special  bonded  warehouse,  a  tax  of  30  cents  per  proof  gallon.  Sweet  wines  held  for  sale 
by  a  producer  on  the  day  this  law  was  enacted  must  pay  an  additional  tax  of  10  cents  per  proof 
gallon  on  grape  brandy  or  wine  spirits  used  in  the  fortification  of  such  wine.  An  additional 
tax  of  20  cents  per  proof  gallon  is  imposed  on  grape  brandy  or  wine  spirits  withdrawn  by  a 
producer  of  sweet  wines  for  fortifying  such  wines,  and  not  used  prior  to  the  passage  of  this  law. 

PENALTY 

Violation  will  be  deemed  a  misdemeanor  and  upon  conviction  the  violator  will  be  fined  not 
more  than  $1000,  or  imprisoned  not  more  than  two  years.  In  addition,  he  will  be  liable  to  double 
the  tax  evaded,  together  with  the  tax, 


W  A  R    T  A  X  23 


SOFT  DRINKS 

On  prepared  sirups  or  extracts  intended  for  use  in  the  manufacture  of  beverages  commonly 
known  as  "soft  drinks"  by  soda  fountains,  bottling  establishments  and  similar  places,  sold  by 
the  manufacturer,  producer  or  importer,  the  following  taxes: 

If  not  sold  for  more  than  $1.30  a  gallon,  a  tax  of  5  cents  a  gallon. 

If  sold  for  more  than  $1.30  a  gallon,  but  not  more  than  $2  a  gallon,  a  tax  of  8  cents  a  gallon. 

If  sold  for  more  than  $2  a  gallon,  but  not  more  than  $3  a  gallon,  10  cents  a  gallon. 

If  sold  for  more  than  $3  a  gallon,  and  not  more  than  $4  a  gallon,  15  cents  a  gallon. 

If  sold  for  more  than  $4  a  gallon,  20  cents  a  gallon. 

Unfermented  grape  juice,  soft  drinks  or  artificial  mineral  waters  (not  carbonated),  and  fer- 
mented liquors  containing  less  than  one-half  per  cent  alcohol,  sold  by  the  manufacturer,  pro- 
ducer or  importer  in  bottles  or  other  closed  containers,  and  all  ginger  ale,  root  beer,  sarsaparilla, 
pop,  and  other  carbonated  waters,  or  beverages,  manufactured  and  sold  by  the  manufacturer, 
producer  or  importer  of  the  carbonic  acid  gas  in  carbonating  same,  are  taxed  at  1  cent  a  gallon. 

On  all  natural  mineral  or  table  waters  sold  by  the  producer,  bottler  or  importer  in  bottles 
or  other  closed  containers  at  more  than  10  cents  a  gallon,  a  tax  of  1  cent  a  gallon. 

Carbonic  acid  gas  in  drums  or  other  containers,  intended  for  use  in  the  manufacture  of  car- 
bonated waters  or  other  drinks,  5  cents  a  pound.  This  tax  must  be  paid  by  the  purchaser  to  the 
seller,  who  will  pay  it  to  the  Collector. 

Monthly  returns  to  the  Collector,  containing  all^  the  information  necessary,  are 
required  of  every  manufacturer,  producer,  bottler  or  importer.  This  return  must  be 
made  under  oath,  and  may  be  called  for  at  any  time. 


War  Tax  on  Cigars,  Tobacco,  and  Manufactures 

Thereof 

(In  effect  30  days  after  passage  of  Act) 

CIGARS 

Cigars  and  cigarettes  manufactured  and  sold,  or  removed  for  consumption  or  sale,  are  taxed 
as  follows,  the  tax  to  be  paid  by  the  manufacturer  or  importer  (old  and  new  taxes  combined): 

Cigars  of  all  descriptions,  made  of  tobacco  or  any  substitute,  and  weighing  not  more  than 
3  pounds  per  1000,  $1  per  1000. 

Cigars  weighing  more  than  3  pounds  per  1000,  if  manufactured  or  imported  to  retail  at  4 
cents  or  more  each,  and  not  more  than  7  cents  each,  $4  per  1000. 

Cigars  manufactured  or  imported  to  retail  at  more  than  7  cents,  but  not  more  than  15  cents 
each,  $6  per  1000. 

Cigars  manufactured  or  imported  to  retail  at  more  than  15  cents  each,  but  not  more  than 
20  cents  each,  $8  per  1000. 

Cigars  manufactured  or  imported  to  retail  at  more  than  20  cents  each,  $10  per  1000. 

The  word  "retail"  means  the  ordinary  retail  price  of  a  single  cigar. 

CIGARETTES 

On  cigarettes  made  of  tobacco  or  any  substitute,  tax  as  follows: 
Those  weighing  not  more  than  3  pounds  per  1000,  $2.05  per  1000. 
Weighing  more  than  3  pounds  per  1000,  $4.80  per  1000. 


24  W  A  R     T  A  X 


TOBACCO   AND    SNUFF 

Tobacco  and  snuff  hereafter  manufactured  and  sold  are  taxed  at  13  cents  a  pound. 

Manufactured  tobacco  or  snuff  in  excess  of  100  pounds,  held  for  sale  by  any  person, 
partnership,  corporation  or  association,  and  all  cigars,  or  cigarettes  in  excess  of  1000, 
on  the  day  of  the  passage  of  this  law;  and  all  manufactured  tobacco,  snuff,  cigars  or 
cigarettes,  removed  from  the  factory  or  custom  house,  prior  to  the  passage  of  this  law  ' 
and  which  are  on  the  day  after  this  law  is  passed  held  and  intended  for  sale,  also  all 
tobacco,  cigars,  cigarettes,  or  snuff  removed  from  factory  or  custom  house  after  passage 
of  this  Act  and  thirty  days  thereafter,  must  pay  an  additional  tax  equal  to  one-half  the 
tax  specified  on  such  article. 

CIGARETTE  PAPER,   TUBES,   ETC. 

Cigarette  paper,  made  into  packages,  books,  sets  or  tubes,  made  in,  or  imported  into 
the  United  States,  the  following  tax: 

On  each  package,  book  or  set,  containing  more  than  25  but  not  more  than  50  papers,  one- 
half  of  1  cent. 

On  each  package,  book  or  set  containing  more  than  50  but  not  more  than  100  papers,  1  cent. 

On  each  package,  book  or  set  containing  more  than  100  papers,  1  cent,  for  each  100  or  frac- 
tional part  thereof. 

On  tubes,  2  cents  for  each  100  tubes  or  fractional  part  thereof. 


War  Tax  on  Facilities  by  Public  Utilities 

(Effective  November  1,  1917) 

This  is  a  new  tax  on  railroad,  steamship,  sleeping  car  and  other  tickets;  on  freight  and 
express  shipments,  telegraph  and  telephone  messages,  which  tax  must  be  paid  at  the  time  such 
tickets  or  services  are  paid  for,  by  the  person  or  corporation  paying  for  them.  The  rates  follow: 

ON  TICKETS 

For  transportation  of  persons  by  rail  or  water,  or  by  any  form  of  motor  power,  on  a  regular 
established  line  when  in  competition  with  a  carrier  by  rail  or  water,  between  points  in  the  United 
States,  or  to  any  point  in  Canada  or  Mexico,  where  the  ticket  is  sold  or  issued  in  the  United  States, 
8%  of  amount  paid.  Commutation  or  season  tickets  for  trips  less  than  30  miles,  or  for  transporta- 
tion the  fare  for  which  does  not  exceed  35  cents  are  not  included. 

BERTHS,   SEATS,   ETC. 

On  all  amounts  paid  for  seats,  berths  and  staterooms  in  parlor  cars,  sleeping  cars,  or  on 
vessels,  10%  of  amount  paid. 

If  a  ticket  or  mileage  book  has  been  purchased  before  this  law  became  effective,  or 
if  cash  fare  is  paid,  the  tax  is  collected  from  the  person  presenting  same,  or  paying  cash 
fare,  by  the  conductor  or  other  agent.  If  a  ticket  is  partially  used  before  November 
1,  1917,  it  shall  not  be  taxed. 

FREIGHT   AND   EXPRESS 

For  transportation  of  freight  by  rail  or  water  by  any  form  of  mechanical  motor  power,  when 
in  competition  with  a  carrier  by  rail  or  water,  3%  of  amount  paid. 

On  parcels  or  packages  by  express  over  regular  routes  between  fixed  terminals,  1  cent  for 
each  20  cents  or  fraction  thereof  paid  therefor. 

On  the  transportation  of  oil  by  pipe  line,  5%  of  the  amount  paid  therefor. 


W  A  R     T  A  X  25 


TELEGRAPH  AND   TELEPHONE   MESSAGES 

On  each  telegraph,  telephone  or  radio  message  or  conversation  originating  in  the  United 
States,  where  the  charge  is  15  cents  or  more,  5  cents.  The  person  paying  the  charge  must  pay 
the  tax. 

REGULATIONS 

If  the  carrier  does  not  receive  the  amount  which  he  would  otherwise  charge,  he  shall 
pay  the  tax  equal  to  that  which  would  be  imposed  if  full  payment  for  such  transportation 
had  been  made. 

The  carrier  is  not  required  to  pay  tax  on  the  transportation  of  any  commodity 
necessary  for  its  use  in  its  business;  or  on  the  transportation  of  company  material  for 
another  carrier  which  is  a  part  of  the  railway  system  of  such  carrier. 

Every  person  or  corporation  receiving  payments  of  the  tax  on  facilities  or  utilities 
must  make  monthly  returns,  under  oath,  in  duplicate,  to  the  Collector  of  the  district  in 
which  the  principal  office  or  place  of  business  of  such  person  or  corporation  is  located. 

LIFE  INSURANCE   POLICIES 

Eight  cents  on  each  $100  or  factional  part  thereof  of  amount  for  which  any  life  is  insured 
under  any  policy  of  insurance,  or  other  instrument.  On  policies  for  life  insurance  in  excess  of 
$500,  issued  on  the  industrial  or  weekly  payment  plan  of  insurance,  40  per  cent  of  the  amount 
of  first  weekly  premium.  Policies  of  reinsurance  are  exempt  from  this  tax. 

MARINE,  FIRE,  ETC.,  INSURANCE 

One  cent  on  each  $4  or  fractional  part  thereof  of  premium  charged  under  each  policy  whereby 
insurance  is  made  or  renewed  upon  property  of  any  description  (including  rents  or  profits)  whether 
against  peril  by  sea  or  inland  waters,  or  by  fire  or  lightning,  or  other  peril.  Reinsurance  policies 
exempt. 

CASUALTY  INSURANCE 

One  cent  on  each  $1  or  fractional  part  thereof  of  premium  charged  under  each  policy  of 
insurance  of  indemnity  for  loss,  damage,  or  liability  (except  bonds  taxable  under  the  stamp  tax 
provision)  issued  or  executed  or  renewed  by  any  person  or  concern  whatsoever  on  any  form  of  in- 
surance, except  life  insurance  and  insurance  described  and  taxed  in  the  two  preceding  paragraphs. 
Reinsurance  policies  exempt. 

Every  person  or  concern  issuing  insurance  policies  upon  which  a  tax  is  imposed 
shall  within  the  first  15  days  of  each  month  make  a  return  under  oath,  in  duplicate  and 
pay  such  tax  to  the  Collector  of  the  district  in  whioh  the  principal  place  of  business  is 
located. 


War  Excise  Taxes 

(Effective  on  day  of  passage) 

AUTOMOBILES  AND   MOTORCYCLES 

On  all  automobiles,  trucks,  automobiles,  wagons,  and  motorcycles,  sold  by  the  manufac- 
turer, producer,  or  importer,  3%  of  the  price  for  which  sold. 

MOTOR  AND    SAILING  BOATS,  YACHTS 

On  the  day  this  law  became  effective,  and  hereafter  on  July  1  in  each  year,  and  also  at  the 
time  of  the  original  purchase  of  a  new  boat  by  the  user,  if  on  any  other  date  than  July  1,  a  tax  is 
imposed  on  the  use  of  yachts,  pleasure  boats,  power  boats,  and  sailing  boats  of  over  five  net  tons, 
and  on  motorboats  with  fixed  engines,  not  used  exclusively  for  trade  or  national  defense,  and 
not  built  according  to  plans  and  specifications  approved  by  the  Navy  Department,  as  follows: 


26  WAR     TAX 


Yachts,  pleasure  boats,  power  boats,  motor  boats  with  fixed  engines,  and  sailing  boats,  of 
over  five  net  tons,  length  not  over  50  feet,  50  cents  for  each  foot.  Over  50  feet  and  not  over  100 
feet,  $1  for  each  foot.  Over  100  feet,  $2  for  each  foot;  motor  boats  of  not  over  five  net  tons,  with 
fixed  engines,  $5. 

GRAPHOPHONES,  PHONOGRAPHS,  ETC. 

On  piano  players,  graphophones,  phonographs,  talking  machines,  and  records  used  in  con- 
nection with  any  musical  instrument,  sold  by  the  manufacturer,  producer,  or  importer,  3  per  cent 
of  the  price  for  which  sold. 

MOVING  PICTURE  FILMS 

On  all  moving  picture  films  (which  have  not  been  exposed)  sold  by  the  manufacturer  or 
importer,  1-4  of  1  cent  per  linear  foot. 

On  all  positive  moving  picture  films  (containing  a  picture  ready  for  projection)  sold  or  leased 
by  the  manufacturer,  producer,  or  importer,  1-2  of  1  cent  per  linear  foot. 

JEWELRY 

On  any  article  commonly  or  commercially  known  as  jewelry,  whether  real  or  imitation,  sold 
by  the  manufacturer,  producer,  or  importer,  3  per  cent  of  the  price  for  which  sold. 

SPORTING  GOODS 

On  tennis  rackets,  golf  clubs,  baseball  bats,  lacrosse  sticks,  balls  of  all  kinds,  including  base- 
balls, footballs,  tennis,  golf,  lacrosse,  billiard  and  pool  balls;  fishing  rods  and  reels,  billiard  and 
pool  tables,  chess  and  checker  boards  and  pieces,  dice,  games  and  parts  of  games  (except  playing 
cards  and  children's  toys  and  games)  sold  by  the  manufacturer,  producer,  or  importer,  3%  of 
price  for  which  sold. 

TOILET  ARTICLES 

Perfumes,  essences,  extracts,  toilet  waters,  cosmetics,  petroleum  jellies,  hair  oils,  pomades, 
hair  dressings,  hair  restoratives,  hair  dyes,  tooth  and  mouth  washes,  dentifrices,  tooth  paste, 
aromatic  cachous,  toilet  soaps  and  powders,  or  any  similar  substance,  article  or  preparation  by 
whatsoever  name  known  or  distinguished,  which  are  used  or  applied  or  intended  to  be  used  or 
applied  for  toilet  purposes,  2%  of  price  for  which  sold. 

PROPRIETARY  MEDICINES 

Pills,  tablets,  powders,  tinctures,  troches  or  lozenges,  sirups,  medicinal  cordials  or  bitters, 
anodynes,  tonics,  plasters,  liniments,  salves,  ointments,  paste,  drops,  waters  (except  those  speci- 
fied under  beverages),  essences,  spirits,  oils,  and  all  medicinal  preparations,  compounds,  or  com- 
positions, the  manufacturer  or  producer  of  which  claims  to  have  any  private  formula,  secret, 
or  occult  art  for  making  or  preparing,  or  claims  to  have  any  exclusive  right  to  the  making  or 
preparing,  or  which  are  sold  under  letters  patent  or  trademarks,  or  which  are  held  out  or  rec- 
ommended to  the  public  as  proprietary  medicines  or  remedies,  2%  of  price  for  which  sold. 

Each  manufacturer,  producer  or  importer  of  any  of  the  articles  enumerated  under  the 
above  heads  must  make  monthly  returns,  under  oath,  in  duplicate,  and  pay  the  taxes 
to  the  Collector  of  the  district  in  which  such  taxpayers'  principal  place  of  business  is 
located. 

CHEWING  GUM 

On  chewing  gum  or  substitutes  therefor  sold  by  the  manufacturer,  producer,  or  importer, 
2  per  cent  of  the  price  for  which  sold. 

CAMERAS 

Cameras  sold  by  the  manufacturer,  producer,  or  importer,  3%  of  the  selling  price. 


ir  A  R    r  A  x  27 


FLOOR  STOCK 

On  automobiles,  automobile  trucks,  automobile  wagons,  motorcycles,  piano  players,  grapho- 
phones,  phonographs,  talking  machines,  records  used  in  connection  with  any  musical  instrument, 
moving  picture  films,  jewelry,  sporting  goods  (as  enumerated  under  that  heading),  toilet  articles 
(as  enumerated  under  that  heading),  proprietary  medicines  (as  enumerated  under  that  heading), 
chewing  gum  and  cameras,  which  on  the  day  the  war  revenue  Act  went  into  effect  were  held  or 
intended  for  sale  by  any  person,  corporation,  partnership,  or  association,  other  than  a  retailer 
who  is  not  also  a  wholesaler,  or  by  the  manufacturer,  producer,  or  importer  thereof,  one-half 
of  the  tax  imposed  on  the  sale  of  such  articles. 


War  Tax  on  Admissions 

(Effective  Nov.  1,  1917) 

This  is  a  new  tax,  on  admissions  to  places  of  amusement  where  a  charge  in  excess  of  5  cents 
is  made.  It  does  not,  however,  include  admissions  to  outdoor  general  amusement  parks,  or  to 
shows  and  rides  therein,  the  maximum  price  for  admission  to  which  is  10  cents,  or  to  places  the 
proceeds  of  which  go  exclusively  to  the  benefit  of  religious,  charitable  or  educational  institutions; 
or  to  agricultural  fairs.  The  list  of  taxes  follows: 

A  tax  equivalent  to  10%  of  any  amount  paid  as  dues  or  membership  fees  (including 
initiation  fees)  to  any  social,  athletic,  or  sporting  club  or  organization  when  the  dues  are  in 
excess  of  $12  per  year;  to  be  paid  by  the  person  making  such  payments. 

One  cent  for  each  10  cents  or  fraction  thereof  of  the  amount  paid  for  admission  to  any 
place,  including  admission  by  season  ticket  or  subscription,  the  tax  to  be  paid  by  the  person  pay- 
ing the  admission  charge. 

On  admission  of  children,  where  a  charge  is  made,  one  cent  in  every  case. 

On  admissions  to  any  public  performance  for  profit  at  any  cabaret  or  similar  entertainment 
to  which  the  charge  for  admission  is  wholly  or  in  part  included  in  the  price  paid  for  refreshments 
or  services,  one  cent  for  each  10  cents  or  fraction  thereof,  the  tax  to  be  paid  by  the  person  paying 
for  the  refreshment  or  service. 

On  free  admissions  a  tax  at  the  same  rate  as  for  similar  paid  admissions. 

On  the  permanent  use  of  boxes  or  seats  in  an  opera  house  or  any  place  of  amusement,  10 
percent  of  the  amount  for  which  a  similar  box  or  seat  is  sold  for  a  single  performance. 

Every  person,  corporation,  partnership  or  association  collecting  admissions  shall  collect 
the  tax  at  the  same  time  and  make  monthly  returns  and  payments,  under  oath,  in  duplicate,  to 
the  Collector  of  the  district  in  which  his  or  their  principal  office  or  place  of  business  is  located. 


War  Stamp  Taxes 

(Effective  Dec.  1,  1917.) 
BONDS  OF  INDEBTEDNESS 

On  bonds,  debentures,  or  certificates  of  indebtedness  issued  on  and  after  Dec.  1,  1917,  5  cents 
on  each  $100  of  face  value  or  fraction  thereof. 

BONDS,  INDEMNITY  AND  SURETY 

Bonds  indemnifying  any  person,  corporation,  or  partnership,  and  all  bonds  for  the  due 
execution  or  performance  of  any  contract,  obligation,  or  requirement,  or  the  duties  of  any  office 
or  position,  and  to  account  for  money  received  by  virtue  thereof,  and  all  other  bonds  of  any 


28  WAR      TAX 


description,  except  such  as  may  be  required  in  legal  proceedings,  not  otherwise  provided  for,  a 
tax  of  50  cents. 

Where  a  premium  is  charged  for  the  execution  of  such  bond  the  tax  is  one  per  cent  on  each 
dollar  or  fractional  part  of  the  premium  charged.  Policies  of  reinsurance  are  exempt  from  this 
tax. 

CAPITAL  STOCK 

Certificates  of  stock  on  each  original  issue  whether  on  organization  or  reorganization,  by  any 
association,  company,  or  corporation,  5  cents  on  each  $100  of  face  value  or  fraction  thereof, 
stamps  representing  said  tax  to  be  attached  to  the  stock  book,  and  not  to  the  certificate  issued. 

If  the  stock  is  without  face  value  the  tax  is  5  cents  a  share  unless  the  actual  value 
is  over  $100  a  share,  in  which  case  the  tax  is  5  cents  on  each  $100  of  actual  value  or  frac- 
tion thereof. 

STOCK  SALES  OR  TRANSFERS 

On  all  sales  or  agreements  to  sell,  or  memoranda  of  sales  or  deliveries  of,  or  transfers  of  legal 
title  to  shares  or  certificates  of  stock  in  any  association,  company,  or  corporation,  whether  made 
upon  or  shown  by  the  books,  or  by  assignment  in  blank,  or  by  any  delivery,  or  by  any  other 
evidence  of  transfer  or  sale,  2  cents  on  each  $100  of  face  value  or  fraction  thereof. 

If  stock  has  no  par  value,  the  tax  is  2  cents  on  the  transfer  or  sale  or  agreement  to  sell  on 
each  share.  If  the  actual  value  is  over  $100  a  share,  the  tax  is  2  cents  on  each  $100  or  fraction 
thereof. 

PROMISSORY  NOTES 

Drafts  or  checks  payable  otherwise  than  at  sight  or  on  demand,  promissory  notes,  except 
bank  notes  issued  for  circulation,  and  for  each  renewal  of  same,  for  a  sum  not  exceeding  $100, 
2  cents;  and  for  each  additional  $100  or  fractional  part  thereof,  2  cents. 

CONVEYANCES 

On  every  deed,  instrument  of  writing  granting,  assigning,  transferring  or  conveying  realty, 
when  the  consideration  or  value  of  the  property  conveyed,  exclusive  of  liens  or  encumbrances, 
exceeds  $100  and  does  not  exceed  $500,  50  cents;  and  50  cents  additional  for  each  additional 
$500  or  fractional  part  thereof. 

STEAMSHIP  TICKETS 

On  tickets,  costing  more  than  $10,  sold  or  issued  in  the  United  States  for  passage  by  any  vessel 
to  a  port  or  place  not  in  the  United  States,  Canada,  or  Mexico,  if  costing  not  exceeding  $30,  $1; 
costing  more  than  $30  and  not  exceeding  $60,  $3;  costing  more  than  $60,  $5. 

CUSTOM  HOUSE  ENTRIES 

Entry  of  goods  at  any  custom  house,  not  exceeding  $100  in  value,  25  cents.  Exceeding  $100 
and  not  exceeding  $500,  50  cents;  exceeding  $500,  $1. 

Entry  for  withdrawal  of  goods  from  customs  bonded  warehouse,  50  cents. 

PROXIES  AND  POWER  OF  ATTORNEY 

Proxies  for  voting  for  officers  or  business  meetings,  except  religious,  educational,  charitable, 
fraternal  or  literary  societies,  or  public  cemeteries,  10  cents. 

Power  of  attorney  from  a  grantor  when  such  authority  is  not  otherwise  vested  in  the  grantee, 
25  cents. 

PLAYING   CARDS 

On  every  pack  of  playing  cards  of  not  more  than  54  cards,  manufactured  or  imported  and 
sold,  after  the  passage  of  this  act,  7  cents  per  pack. 


WAR      TAX  29 


PARCEL  POST  PACKAGES 

On  every  parcel  or  package  transported  by  parcel  post  between  points  in  United  States  on 
which  the  postage  amounts  to  25  cents  or  more,  one  cent  for  each  25  cents  or  fractional  part 
thereof  charged,  tax  to  be  paid  by  sender. 

PRODUCE  SOLD  ON  EXCHANGE 

On  each  sale,  or  agreement  to  sell,  including  so-called  "scratch  sales,"  of  any  product  or 
merchandise  at  any  exchange  or  board  of  trade,  or  similar  place,  for  future  delivery,  2  cents  for 
each  $100  in  value,  and  2  cents  for  each  additional  $100  or  fractional  part  in  excess  of  $100. 

Every  sale  or  agreement  of  sale,  or  agreement  to  sell,  must  be  accompanied  by  a  bill,  memo- 
randum, agreement,  or  other  evidence  of  the  transaction,  to  which  there  shall  be  affixed  stamps 
to  the  amount  of  the  tax. 

EXCEPTIONS  AND  REGULATIONS 

These  taxes  do  not  apply  to  agreements  evidencing  a  deposit  of  stock  certificates  as 
collateral  security  for  money  loaned  thereon,  nor  to  deliveries  or  transfers  to  a  broker  for 
sale,  nor  to  transfers  by  a  broker  to  a  customer  on  whose  order  he  has  purchased;  but  such 
transfers  must  be  accompanied  by  a  certificate  setting  forth  the  facts. 

In  case  of  sale  where  the  transfer  is  shown  only  by  the  books  of  the  company,  the 
stamp  must  be  placed  on  the  books.  When  the  transfer  certificate  is  made  the  stamp 
must  be  placed  on  the  certificate. 

In  cases  of  agreement  to  sell,  or  where  the  transfer  is  by  delivery  of  the  certificate 
assigned  in  blank,  a  bill  or  memorandum  .of  the  sale  must  be  given  to  the  buyer  with  the 
stamp  affixed.  Such  bill  or  memorandum  must  show  the  date  of  sale,  name  of  seller, 
amount  paid,  and  description  of  the  thing  sold. 

PENALTY 

Failure  to  affix  proper  stamps,  with  intent  to  evade  the  law,  subjects  the  offender  to  a  fine 
not  exceeding  $1000,  or  imprisonment  not  more  than  six  months,  or  both. 


Special  Taxes 

(Old  Law) 
CAPITAL   STOCK. 

Every  corporation,  joint-stock  company  or  association,  organized  for  profit  and  having 
a  capital  stock  represented  by  shares,  and  every  insurance  company,  shall  pay  annually  a  special 
excise  tax  with  respect  to  the  carrying  on  or  doing  business  equivalent  to  50  cents  for  each  $1,000 
of  the  fair  value  of  its  capital  stock,  and  in  estimating  the  value  of  capital  stock  the  surplus  and 
undivided  profits  shall  be  included. 

An  exemption  of  $99,000  shall  be  allowed  from  the  capital  stock  as  defined,  of  each  corpora- 
tion, joint-stock  company  or  association,  or  insurance  company.  This  tax  is  not  imposed  upon 
any  corporation,  joint-stock  company  or  association,  or  insurance  company  not  engaged  in  business 
during  the  preceding  taxable  year,  or  which  is  exempt  under  the  income  tax  law. 

An  exemption  is  allowed  foreign  corporations  equal  to  such  proportion  of  $99,000  as  the 
amount  invested  during  the  preceding  year  bears  to  the  total  amount  invested  in  the  business 
in  the  United  States.  Foreign  corporations  must  make  return  of  capital  invested  outside  the 
United  States. 

BROKERS 

Stock  and  bond  brokers,  $30;  pawnbrokers,  $50;  ship  brokers,  $20;  custom  house  brokers,  $10. 


30  W  AR     TAX 


THEATERS,  ETC. 

Having  a  seating  capacity  of  not  more  than  250,  $25;  seating  more  than  250  and  not  more 
than  500,  $50;  seating  more  than  500  and  not  more  than  800,  $75;  seating  more  than  800,  $100. 
In  towns  of  5,000  or  less,  one-half  the  above  taxes. 

Circuses  $100.     All  other  public  exhibitions  or  shows  for  money,  $10. 

This  does   not   include  chautauquas,  lecture  lyceums,  agricultural   or  industrial 
fairs  or  exhibitions  held  under  the  auspices  of  religious  or  charitable  associations. 

Bowling  alleys  and  billiard  rooms,  $5  for  each  alley  or  table. 


Postal  Rates 

(Effective  30  days  after  passage.) 

On  all  first-class  mail  matter,  except  postal  cards  and  drop  letters,  3  cents  per  ounce  or 
fraction  thereof. 

On  drop  letters  of  the  first  class,  2  cents  an  ounce  or  fraction  thereof. 

On  postal  cards  and  private  mailing  or  post  cards,  2  cents  each. 

On  publications  entered  as  second-class  matter  sent  by  the  publisher  or  news  agent,  the 
rates  are  as  follows: 

On  the  portion  of  such  publications  devoted  to  matter  other  than  advertisements,  beginning 
July  1,  1918,  \%  cents  per  pound;  on  and  after  July  1,  1919,  1^  cents  per  pound. 

On  the  portion  of  such  publications  devoted  to  advertisements  the  rates  are  based  on  the 
zones  of  the  parcel  post  system: 

ZONE  RATE  PER  POUND 

On  and  after      On  and  after     On  and  after    On  and  after 
July  1,1918       July  1,1919     July  1,1920     July  1,1921 

First  and  second \l/i  cts.  1%  cts.  \%  cts.  2  cts. 

Third 1^  cts.  2      cts.  2j^  cts.  Sets. 

Fourth 2      cts.  3      cts.  4      cts.  5  cts. 

Fifth 2M  cts.  3H  cts.  4%  cts.  6  cts. 

Sixth 2j^  cts.  4      cts.  5^  cts.  7  cts. 

Seventh 3      cts.  5      cts.  7      cts.  9  cts. 

Eighth 3M  cts.  5%  cts.  7%  cts.  10  cts. 

Where  the  space  devoted  to  advertisements  does  not  exceed  five  per  cent  of  the  total  space 
the  rate  of  postage  is  the  same  as  if  the  whole  of  such  publication  were  devoted  to  matter  other 
than  advertisements. 

On  newspapers  and  periodicals  maintained  by  and  in  the  interest  of  religious,  educational, 
scientific,  philanthropic,  agricultural,  labor,  or  fraternal  organizations,  not  organized  for  profit, 
and  none  of  the  net  income  of  which  inures  to  the  benefit  of  any  private  stockholder  or  individual, 
the  second-class  postage  rates  shall  be,  on  and  after  July  1,  1918,  \}/%  cents  a  pound,  and,  on  and 

after  July  1,  1919,  1J4  cents  a  pound,  irrespective  of  the  zone  in  which  delivered. 

p 

Letters  written  and  mailed  by  soldiers,  sailors  and  marines  assigned  to  duty  in  a 
foreign  country  engaged  in  the  present  war  may  be  mailed  free  of  postage. 

Where  the  total  weight  of  any  one  edition  or  issue  of  any  publication  mailed  to  any 
one  zone  does  not  exceed  one  pound,  the  rate  of  postage  shall  be  one  cent. 


W  A  R    TAX  31 


Definitions  of  Tax  Terms  Used 

"Domestic"  means  created  under  the  law  of  the  United  States,  or  any  state,  territory,  or 
district,  and  "foreign"  means  created  under  the  law  of  any  other  possession  of  the  United  States 
or  of  any  foreign  country. 

"Corporation"  includes  joint  stock  companies  or  associations  and  insurance  companies. 

"Taxable  year"  means  the  twelve  months  ending  December  31,  excepting  in  the  case  of  a 
corporation  or  partnership  which  has  fixed  its  own  fiscal  year,  in  which  case  it  means  such  fiscal 
year. 

"Prewar  Period"  means  the  calendar  years  1911,  1912,  and  1913;  or  if  a  corporation,  partner- 
ship, or  individual  was  not  in  business  during  the  whole  period,  it  means  as  many  of  such  years 
during  the  whole  of  which  it  was  in  business. 

"Net  Income"  means  in  the  case  of  a  foreign  corporation  or  partnership  or  non-resident  alien 
person,  the  net  income  received  from  sources  in  the  United  States. 

"United  States"  means  only  the  States,  the  territories  of  Alaska  and  Hawaii,  and  the 
District  of  Columbia. 

"Trade"  and  "business"  includes  professions  and  occupations. 


ADDENDA 

WAR  EXCESS  PROFITS  TAX 

In  order  to  cover  a  case  under  the  War  Excess  Profits  tax,  other  than  the  ex- 
amples shown  on  pages  15,  18  and  19,  the  following  example  is  added: 

EXAMPLE  NO.  6 

In  case  of  an  individual  who  receives  income  not  based  on  invested  capital,  as 
salary  or  proceeds  of  a  commission  business  or  of  a  profession,  the  War  Excess 
Profits  tax  is  levied  upon  the  net  income  less  a  flat  deduction  of  $6,000,  and  at  a  flat 
tax  rate  of  8%. 


Taxable  Income    $44,000 

Rate   of   tax 8% 


Tax    $  3,520 

NOTE:  Where  the  sum  of  the  flat  deduction  and  the  percentage  deduction 
exceed  15%  of  the  taxable  year  capital,  the  total  deduction  shall  be  15%  of  such 
capital. 


AN  INITIAL  PINE  OF  25  CENTS 

OVERDUE. 


Gayford  Bros. 

Makers 
Syracuse.  N.  Y. 

PAT.  JAN.  21.  1908 


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